Currency Updates:
AUD/USD Local bids stymied Europe’s bear run and a short covering lift took hold heading into NY’s open. The pair sat near 0.9355 as NY. the lift persisted but halted at 0.9366. Offers near the 200 hour MA (0.9373) aided in capping gains. The above f/c US CPI saw AUD react worse than most major ccys as the market is now more sensitive to being long AUD after the somewhat dovish RBA minutes. Post-CPI AUD/USD dived down to a 0.9329low. A meager bounce saw the pair briefly above 0.9340 but US yields remained firm and so was the USD. AUD/USD was heavy in the afternoon and sat just above the day’s low late in the day. Trader now look to the Fed for their next cue. Any hawkish hints from the FOMC should is likely to elicit a similar response to today’s CPI reaction. Should the post-Fed reaction be similar, AUD/USD should clear support in the 0.9305/20 zone where the 21 & 55-DMAs, daily cloud top and June 6 low sit. If cleared a retest of big support near 0.9200/10 is likely.
EUR/USD Europe made a couple of attempts to clear the 200 hour MA overnight but failed. Solid offering interest ahead of 1.3600 conspired with the MA to cap European bulls at 1.3579. A drift lower had it near 1.3565 into NY’s open. A brief rally came crashing down after the above forecast US CPI. US yields spiked higher after the data & the USD went broadly bid. EUR/USD dived down to a 1.3536 low but only a meager bounce near 1.3550 was possible. US yields and the USD held firm in NY’s afternoon and the pair sat near 1.3540 late in the day. Traders now await the Fed tomorrow. They will look to see if today’s CPI has the FOMC’s language take a more hawkish bend. Should that be the case EUR/USD is likely to take out the 1.3500 barrier and run stops below that level and 1.3475/80. Bears then target big support near 1.3300. Should the Fed lean the other way EUR/USD bears are likely to cover. The pair then may be set to trade a broad 1.3500-1.3750 range for the time being.
USD/JPY An above-forecast US CPI report gave USD/JPY a lift with rising yield spreads, though prices barely penetrated the daily Cloud base at 102.22 before settling in ahead of the London close. USD/JPY hasn’t had much luck holding rallies beyond the daily Cloud (102.22-66 last) since plunging below it in Jan. Soft US housing data and doubts tomorrow’s FOMC results will show meaningful policy variation from the last were enough to keep USD/JPY gains in check. Yen traders will also be watching for fallout in the EMs from higher US rates and possible risk-off feedback into the yen (funding shorts covered). The hourly down TL from 102.80 is by 102.30 now and the next upside pivot pt. The Kijun at 101.80 and the 200-DMA by last week’s 101.60 low are the key supports in case Japan’s Trade deficit does not expand as expected in tonight’s May release or the FOMC throw cold water on USD bulls looking for hints of rate hikes sooner than later. AUD/JPY’s drop to 95.14 o/n was caught between the daily Cloud top & 50-DMA. GBP/JPY shrugged of the low UK CPI and EUR/JPY deferred to Fri’s 138.55 high. BOJ Minutes also out tonight.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ Current Account – Qtrly Q1 f/c 1.300b, D21-prev
• 22:45 NZ Current Account- Annual Q1 f/c -6.37b, -7.55b-prev
• 22:45 NZ C/A Balance To GDP Q1 f/c -2.8%, -3.4%-prev
• 23:50 JPY Exports YY May f/c -1.2%, 5.1%-prev
• 23:50 JPY Imports YY May f/c 1.7%, 3.4%-prev
• 23:50 JPY Trade Balance Total Yen May f/c -1172.7b, -808.9b-prev
• 01:30 CN China House Prices YY May 6.7%-prev
Looking Ahead – Events, Other Releases (GMT)
• 23:50 JP Bank of Japan May 20-21 meeting minutes
