JAPAN DATA: Offshore Investors Preferring Local Bonds To Stocks So Far In 2025

Early G10 FX trends are skewed against the USD, the BBDXY index is edging down last near 1301. We are just above intra-session lows from Monday's session (close to 1300). 

• Yen is outperforming at the margins, so far today, after lagging broader USD softness. USD/JPY was last near 155.20/25, around 0.20% stronger in yen terms. We are slightly up from session lows (155.17).  Downside focus in the pair is likely to rest just under 155.00, where the 50-day EMA comes in (154.97). This region has also marked recent lows.
• AUD/USD is up a more modest 0.1%, it's 50-day EMA up at 0.6335, the pair last near 0.6280, while NZD is slightly outperforming, around +0.20% higher to 0.5680/85. This pair's 50-day EMA is at 0.5734.   
• EUR and GBP are both a touch higher, but largely on the sidelines for now.
• Cross asset sentiment is weighing on the USD. US Tsy futures pointing higher, along with US equity futures (+0.57% for Eminis), as the markets digest Trump's inauguration. The positive sign around no Day 1 tariff announcements the main driver of better US equity futures, lower US yields and a softer USD.
• Today's data calendar is light from an Asia Pac standpoint, which will likely leave FX trends driven by headlines/cross asset trends. 

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 142.73/144.48 - High Dec 9 / High Nov 11  
• PRICE: 141.11 @ 16:39 GMT Jan 20
• SUP 1: 140.00 - Round number support
• SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
• SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing    

A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective. 

Business NZ/BNZ’s performance of services index fell to 47.9 from 49.1 but the Q4 average was still 2 points higher than Q3 at 47.7 signalling that the sector contracted at a slower rate in the final quarter of 2024. All components remain under 50 though signalling continued services weakness, as is the case with manufacturing too.

• The December drop was driven by activity, inventories and supplier deliveries. Orders were stable just below the breakeven-50 level, while employment rose 0.7 points to 47.4 (highest since August).
• Businesses remain concerned about the cost of living and the weakness in the economy. The share of negative comments in December rose to 57.5% up from 53.6% but still lower than October’s 59.1%.
• BNZ notes that the PSI remains below Australia’s services PMI, which is just in growth territory at 50.8. 

NZ PSI vs PMI manufacturing