Currency Updates:
AUD/USD Tight ranges dominated overnight and most of NY trade. The miss to the US C/A barely moved AUD/USD within of its 0.9327/47 o/n range. Action picked up quickly after the Fed. An initial spike lower in US yield due to lowered 2014 GDP forecasts from the Fed sent AUD/USD just above 0.9365. A rebound in yields then saw a new s-t trend low of 0.9322 hit. However, when it became clear the Fed wasn’t going to drop any hawkish surprises on the mkt the USD turned heavy. AUD/USD made a steady ascent thereafter & lifted above 0.9400. Little pullback was seen and the pair sat just below the day’s highs late in the session. The bounce off the daily cloud top & 55-DMA have bulls breath a sigh of relief. They now need to clear June’s high to take control. They have work to do though as yield spreads don’t reflect a bullish view. If 0.9440 isn’t cleared soon a retest & break of 0.9320 could be due.
EUR/USD EUR bears covered shorts in European hours, mostly vs. GBP, and EUR/USD lifted from s-t sup near 1.354. It sat just above 1.3560 into NY’s open. The pair’s bid persisted in early NY after the US current account misses big. A lift near 1.3585 ensued before the pair settled into a 1.3565/80 range ahead of the Fed. Post-Fed saw algos go wild. The lowered Fed 2014 GDP f/c and fewer FOMC members wanting a hike in 2015 sank US yields and the USD. EUR/USD spiked up to 1.3600. Offers into the 21-DMA & June 10 high halted the rise and a reversal in US yield losses then spiked EUR/USD down to 1.3548. Yellen’s presser gave no surprise hawkish comments and US yields slipped again. EUR/USD rebounded and sat just below 1.3590 late in the day. Risks to a bigger short squeeze grow post-Fed. Bears are frustrated that the downside is holding while spread widening abates and day/week RSIs turn up. Stops sit above 1.3605 and if run the 200-DMA & early June high (1.3565/75) are then targeted. A break there opens the door to a test of the 21-WMA (1.3727) and May 12 high at 1.3775.
USD/JPY There was widespread USD selling after the mkts realized, for a second time, that higher Fed Funds (dots) estimates do not mean the Yellen Fed is yearning to raise rates. In fact, in Chair Yellen’s presser it was clear there are far fewer scenarios that would lead them to tightening quickly or with gusto, than there are ones that would leave the low for longer mantra in place. Tsy yields fell enough to yank USD/JPY to it’s session lows below 102. The day’s fleeting 102.38 high was inspired by the higher dots. The pair is at new lows as we write this, which shows there’s so much doubt about Fed normalization and higher rates that even a rebound in the N225 futures couldn’t stop the USD/JPY rot. Tues’s 101.81 low and the Tenkan at 101.80 are nearby support. 101.57-61 is key on a closing basis. Today’s weak close after another probing of the daily Cloud above will tend to reinforce the bearishness of its presence. Lousy Japanese Trade data, particularly the first y/y drop in Exports since Feb ’12, leave the BOJ and Abe with more work to do. The dovish Fed read gave high-beta yen crosses a lift. Carry and risk-on until the Fed gets serious.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ GDP Production QQ Q1 f/c 1.2%, 0.9%-prev
• 22:45 NZ GDP – Annl-Avg, Prod-Bas Q1 f/c 3.1%, 2.7%-prev
• 22:45 NZ GDP – Annual Q1 f/c 3.7%, 3.1%-prev
• 22:45 NZ GDP Expenditure QQ Q1 f/c 1.3%, 0.6%-prev
• 23:30 JP Reuters Tankan DI Jun 1900%-prev
• 23:50 JP Foreign Bond Investment w/e 1326.9b-prev
• 23:50 JP Foreign Invest JP Stock w/e 343.5b-prev
Looking Ahead – Events, Other Releases (GMT)
• 01:30 JP BOJ Board Member Morimoto Speaks in Akita
