USD/JPY trades heavier along with the Korean Won as North Korea tensions also weigh on Japan stocks.
North Korea tensions were the highlight of the Asia session, eclipsing last night’s blockbuster ADP Employment Change, and the FOMC minutes Federal Reserve balance sheet unwind bombshell. President Trump spoke with Prime Minister Abe about the situation ahead of his meeting with China’s President Xi, reiterating it seems nothing is off the table. Unsurprisingly, the USD/KRW has traded higher throughout the session, up 9 Won or 0.80% to 1133.
USD/JPY has also traded heavily, down 40 points to 110.30 at one stage before settling at 110.50 as the Nikkei dropped one percent on safe-haven flows. This is in exception to most of the G-10 where the USD has been flat to small up on the day. Clearly, regional worries are taking precedence over a massive ADP figure of 263,000 and the news that the FOMC are looking at a balance sheet run down to start later in the year. The latter in particular is significant, as to my mind it adds up to a potentially 3rd effective tightening to come making it four for the year.
The focus will now be on the important 110.00/110.10 support level on USD/JPY where we expect to see a lot of two-way interest with the possibility of stop-losses behind setting a new trading range. Ahead of this, there is support at 110.25, with resistance at yesterday’s high at 110.75 and then 111.50. As equities and metals rolled over last night on the FOMC news, it was surprising that USD yields in fact fell.
As equities and metals rolled over last night on the FOMC news, it was surprising that USD yields in fact fell. A catch-up correction higher is possibly the only thing that could prevent at least a test of the 110 area. Tonights Non-Farm Payrolls becomes even more important in this context with estimations marked higher materially following the ADP overnight.
The Aussie Dollar has been the other main mover in the Asian session with a double whammy from the banking regulator and China data. APRA, the Australian Banking Regulator, intends to make banks hold more capital against risky mortgage lending. Housing Capital: source AFR This followed already announced limits to interest-only lending recently announced.
The March China CaixinPMI Services then came in at a six-month low of 52.2.
CHINA MAR CAIXIN PMI SERVICES: 52.2 (6-month low and 3rd straight sequential decline) V 52.6 PRIOR,
COMPOSITE PMI: 52.1 (6-month low) V 52.6 PRIOR – Source TradeTheNews.com 
The AUD dropped 40 points to a low of 7530 before a slight recovery to 7542. Having broken down on the AUD/JPY cross the AUD/USD is now eyeing the important support zone of 7490/7500. A daily close below suggests a new and lower trading range is on the card. Up above AUD now has resistance at 7590 and then 7680.
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