Currency Updates:
EUR/USD The generally below f/c Final EZ PMIs aided a EUR/USD drop to 1.3594. The slide halted on profit taking ahead of the ECB by a short market and talk of a reserve manager bids near 1.3590. The pair bounced near 1.3610 as NY got going. The bounce continued to 1.3628 after the soft German inflation data failed to inspire bears. Aiding the bounce was EUR/JPY’s spike from near 138.80 to 139.25 after Abe’s growth plan draft hit the wires. EUR/USD couldn’t must more gains though and began dipping as US yields continued their climb begun late last week. A brief blip up after the PMI data was miscalculated. Talk circulated that the report was incorrect and the USD gained strength. The initial data report was eventually corrected to show a result in line with forecasts. US yields added to earlier gains and the USD stayed strong. EUR/USD made a run at last week’s low but couldn’t crack it as 1.3588 was all bears could muster. Little bounce was seen though as the pair sat near 1.3595 late in the day. The pair has consolidated in the 1.3585-1.3650 range and is likely to do so until the ECB.
USD/JPY A clear upside breakout in Nikkei futures past its 100-DMA and daily Cloud got the yen selling ball rolling O/N. There was chatter o/n about Japan’s NISA cap being doubled. Rebounding Tsy yields reinforced USD/JPY’s technical boosts from clearing the down TL off the March & April highs and last week’s 102.14 highs. The pair is now near daily Cloud base offers by 102.50 and buy stops above. The Cloud top’s at 102.66. In NorAm trading, Reuters reported on a draft of Abe Third Arrow plan, which was still a work in progress, short on things like GPIF & corporate tax cuts, and long on long-term goals with few tangible means of reaching them. That Reuters exclusive allowed the yen to fall further on the assumption that the BOJ will in time have to pick up the slack from weak structural reforms. ECB’s Nowotny tried to talk the EUR lower again, but EUR/JPY is up near last week’s high after failures the last two weeks to close it below the 200-DMA. The worry is the markets have priced in more than the ECB will deliver on easing this Thurs. AUD/JPY’s at its Cloud top, 61.8% & 50-DMA hurdles. Japan Apr Real GDP was -3.7% says JCER -Nikkei.
AUD/USD The pair was unable to recover from the post-Oz building’s data slide. Europe tried to break 0.9240 early in their session but were unable to. A bounce had AUD/USD near 0.9260 as NY got going. Firm US yields kept the USD bid and bears pressured AUD/USD to a new low of 0.9235. The initial ISM report allowed for a small bounce but the corrected data had the USD firm again and the pair sat just above 0.9240 late in the afternoon. The downside looks vulnerable again as the weekly cloud caps, day/week RSIs are biased down, the pair has fallen back into the daily cloud and yield spreads narrow. Big even risk from Oz may increase the bear risks. Oz retail sales are due later but the big event is the RBA. No change in rates i expected but the mkt may look for Stevens pressure AUD as it remains near recent highs against many ccys and iron ore prices continue to trade heavy. The 0.9200/10 area remains support but if broken, the 200-DMA & daily cloud base (0.9175/80) are initial support. Beyond that 0.9120/40 (March 25 low, 100-DMA, mid-March highs) is targeted. A break there opens the door to 0.8985/00.
22:45 NZ Terms of Trade QQ Q1 f/c 1.80%, 2.30%-prev
• 22:45 NZ Terms of Trade – Exp Vol Q1 f/c 1.00%, 9.70%-prev
• 22:45 NZ Terms of Trade – Imports Q1 f/c -1.30%, -2.80%-prev
• 22:45 NZ Terms of Trade – Exports Q1 f/c 1.00%, -0.50%-prev
• 01:30 AU Current Account Deficit Q1 f/c 7.00b, 10.10b-prev
• 01:30 AU Net Exports Contribution Q1 f/c 0.80%, 0.60%-prev
• 01:30 AU Retail Sales MM Apr f/c 0.20%, 0.10%-prev
• 04:30 AU RBA Cash Rate Jun f/c 2.50%, 2.50%-prev
• 01:00 CN NBS Non-Mfg PMI May 54.8-prev
• 01:45 CN HSBC Mfg PMI Final May 49.7-prev
