Currency Updates:
The Australian Dollar (AUD): AUD consolidated the gains inspired by another strong OZ jobs data and also a better than f/c China trade data. The pair held within the 0.9370-95 zone. However, bigger impact on AUD was felt vs the EUR on Draghi’s comments. EUR/AUD sat near 1.4870 into ECB rate decision and shot briefly above 1.4900 in the early comments. His tip to the GC being comfortable taking action “next time” sent the pair spiralling lower. RBA’s SOMP will be due at 01:30GMT, indication of an improving economy would help the AUD.
AUD/USD: The 21-DMA and April 30 low were cleared. The slide fell short of the double lows of April 22 & 23 (1.4710/15) as it stopped at 1.4760/65. Further pressure may be put on the rally as daily RSI is biased down and yield spreads widen. Attention now shifts to RBA’s SOMP later today. Any upgrades to econ growth and inflation should boost AUD further against most currencies. AUD/USD may then run for stops above 0.9400 and test weekly cloud base at 0.9425 while EUR/AUD may clear 1.4710 and April low near 1.4645.
EUR/USD: Not a good day for the EUR, or those who bought it after the ECB announced no changes to policy, only to run into a slew of hints from Draghi in his presser that the prospect of very low-for-a-long-time inflation and more downside than upside risks to the economy meant that an easing at the June meeting is a serious threat. He also noted the strong EUR’s unwelcome role. EUR/USD spiked to its 1.3995 high after US Claims fell back nicely and Draghi took a little time getting to the more overtly dovish portions of his Q&A. The barrier defenses into 1.4000 held and longs trampled each other to get to the exits, removing o/n and the preceding four days’ lows in the process. The 21-DMA at 1.3846 is nearby as the NY session winds down. Yellen remained true to form, but reminded that even taper completion was a function of data- dependency tests at each meeting. A poor US 30-yr auction added a little yield-differential weight to EUR/USD, but no new intraday lows yet. Today’s weak German IP will place some emphasis on Friday’s German Trade & C/A results. China CPI up first, after better Trade data there o/n. No good news from Ukraine.
USD/JPY EUR/JPY led the way down for yen pairings today after the ECB announced no policy changes, then Draghi laid the foundations for June easing during his presser. EUR/JPY is well below its up TL from Apr ’13 lows, Friday at 141.38. The daily Cloud, which had more or less propped up the cross since it twisted mid-April, was deeply delved, though the base at 140.02, the 50% of the Feb-Mar rise there and Mar 23 & Apr 8 lows either side of the figure remain unscathed so far. There’s still room for the ECB to disappoint with its easing execution next month, but the broader issue is the waning confidence in the Abenomics trades from last year (short yen and long Nikkei) as USD/JPY y/y % changes approach zero and drastically reduce Japanese exporter profits and imported inflation and reflation. USD/JPY’s series of higher lows since Feb is intact, but the 101.32 low from last month is uncomfortably close, even if importers remain bid in the low 101.00s. The 200-DMA is at 101.07, so a sub 101 close would force more specs to sell. The ECB’s expected ease may put pressure on the BOJ to rethink not launching QQE2 before the GPIF midyear reallocation.
Looking Ahead – Economic Data (GMT)
• 22:00 NZ Govt Optg Balance Mar -173.70%-prev
• 22:00 NZ Govt. Monthly Debt Mar 27.10%-prev
• 22:45 NZ Elec Card Ret Sales MM Apr 0.00%-prev
• 22:45 NZ Elec Card Ret Sales YY Apr 5.10%-prev
• 23:50 JP Foreign Reserves Apr 1279.30b-prev
• 05:00 JP Coincident Indicator MM Mar -180.00%-prev
• 05:00 JP Leading Indicator Mar -460.00%-prev
• 01:30 CN PPI YY Apr f/c -1.80%, -2.30%-prev
• 01:30 CN CPI YY Apr f/c 2.0%, 2.40%-prev
• 01:30 CN CPI MM Apr f/c 0.1%, -0.50%-prev
Looking Ahead – Events, Other Releases (GMT)
• 01:30 AU RBA Statement on Monetary Policy
