Currency Updates:
The Australian Dollar (AUD): Size orders in the 0.9430/40 met buyers in early Europe. A sharp rise in US yield then saw AUD/USD slammed towards 0.9380. It sat nearby as NY got going. Above f/c US data and a short covering rally in EUR/AUD up near 1.4465 pushed AUD/USD to a low of 0.9372. A bounce to 0.9405 ensued as US yields gave back early gain but further gains were not to be seen. Action settled quickly & the pair sat just above 0.9400 for the remainder of NY’s afternoon. AUD longs could be getting nervous. The pair has struggled to hold ground above 0.9400 since April. Adding to bulls concerns are day/week RSIs rolling over from near o/b territory, narrowing yield spreads and new 2014 lows set for iron ore & rebar. The RBA’s Kent noted AUD he wouldn’t be surprised if AUD fell and stated he thinks it is high given the fall in commodity prices. A test of 0.9305/20 (21 & 55-DMAs, daily cloud top, June 6 low) support may be due. If it breaks it’s likely key support near 0.9200 will be tested again.
EUR/USD A spike in US yields early in Europe’s morning saw EUR/USD make a quick dive to 1.3500/15 support again. The level held though and the pair sat near 1.3545 into NY’s open. The bounce persisted in early NY even as U.S. IP, Cap Utilization and NAHB data gave positive surprises. Short covering on recently popular carry trades and a give back of early US bond yield gains aided EUR/USD’s lift. The pair rallied to the 200-hour MA (1.3580 at the time) where large offers were noted on the aggregators. More offering interested was noted up to the 1.3600 area. This was enough to halt the rally & the pair pulled back to sit near 1.3565 late in the day. Little data is due from the EZ so the broad 1.35-1.36 range is likely to remain intact. The US releases CPI tomorrow & has the FOMC on Wednesday. hawkish results from those two events could lead EUR/USD to break its recent consolidation phase and make a run for stops below 1.3500 and large ones touted below 1.3475/80. A stop run could see the pair make a quick run to solid support near 1.3300.
USD/JPY Risk aversion kept the yen bid to begin the week, but ranges were tight ahead of the FOMC meeting on Wed. Solid US econ data was largely offset by the IMF’s sharply reduced 2014 US GDP f/c, with curve steepening dominating fairly tight Tsy ranges. Nikkei weakness o/n was trimmed a bit, but USD/JPY failed to clear the USD1.35b 101.95 NY expiries. The pair is wedged between the 200-DMA by Thur’s 101.60 low and the last two days’ highs at 102.14. Japan’s May Trade report is out Wed to provide local interest. There is growing impatience from the mkts and from the BOJ on Abe govt structural reforms, the latest details of which are expected on June 27. Minutes from the last BOJ probably won’t fill in many gaps. EUR/JPY got a short profit-taking lift after the post-ECB lows by 137.70 held again and traders pointed to a BB article that basically reaffirmed mkt expectations that the ECB will be on hold until after the AQR ends and TLTROs are launched. Nevertheless, EUR/JPY remains inside Friday’s range and well below key resistance in the 138.80-90 range. Oversold daily & weekly techs give the cross some near-term support.
Looking Ahead – Economic Data (GMT)
• 02:00 CN FDI (YTD) May 5.00%
Looking Ahead – Events, Other Releases (GMT)
• 01:30 AU RBA will release the minutes of June policy meeting
