Currency Updates:
AUD/USD Sideways chop continues in AUDUSD. Shanghai A shares saved themselves..again…right on the year-long uptrend line, which turned out to be fortuitous for the All-Ords, that had a look at the 200 dma support this week. Combine that with a miss in the Personal Spending component of the US PCE data and it put a dagger to the bond bears and calmed the waters further across the carry currencies. The downside threat to Oz remains the loss of support in the domestic rate market as well as some potential trouble in major asset markets. The European stock and bond markets have given back all of their ECB gains and key reversals in Canada and the US from Tuesday are still in play. Bottom line is that the risk-on/risk-off game is at a deadlock, but whichever way it breaks, the AUD is sure to follow.
EUR/USD opened NYC 1.3613, -15 pips vs last night’s close, O/N range 1.3611/42. O/N price action saw EUR/GBP selling at the fixes & after a shift in UK mortgage rules. Positioning was the primary factor that drove EUR/USD to global session lows. Spec buyers long from the bounce after US GDP yesterday owned them between 1.3626-51and needed another soft US data set. US PCE/PI was pretty much a Goldilocks number, close to f/c – strong points (personal income +0.4%) offset by soft real PCE (-0.1%) The Y/Y prices +1.8% were the highest since Oct ’12 and sparked long EUR/USD liquidation. Soft EZ stocks added to their woes. Profit-taking in thin liquidity drove prices back up, US traders’ eyes on the US/Germany WC game, EUR/USD last 1.3609, US range 1.3576/1.3618.
USD/JPY A mixed day for the yen, but USD/JPY had some downside drama, breaking below the 200-DMA, again, the June lows at 101.60 and the 61.8% of the May-June rally at 101.57. A fresh drop in Tsy yields and early weakness in equities, plus a newswire-story-driven dip in EUR/JPY took out those supports after mediocre US Consumer Spending results. But as the NY session nears its conclusion, it’s too close to call which side of the 200-DMA (101.69) prices will end on. The pair already looks weak technically, being forced lower by the daily Cloud as the Tenkan crossed below the Kijun today. A surfeit of stories about Japanese asset reallocation into stocks, mostly domestic, and into foreign bonds ahead of the formal GPIF reallocation later this year, has not been enough to get USD/JPY back above its May or April highs. Toss in US rates not unable sustain uptrends out the curve and 2-yr ylds now looking top-heavy again by 50bp and USD/JPY will need all the local help it can get. EUR/JPY tumbled after another 139/200-DMA rejection and then on an MNSI ECB story. A rebound in stocks from morning lows helped crosses recover. CPI, Spending & Sales from Japan tonight.
Looking Ahead – Economic Data (GMT)
• 23:30 All Household Spending YY May f/c -2%, -4.6%-prev
• 23:30 All Household Spending MM May f/c 2.5%, -13.3%-prev
• 23:30 CPI, Core Nationwide YY May f/c3.4%, 3.2%-prev
• 23:30 CPI, Overall Nationwide May 3.4%-prev
• 23:30 CPI Core Tokyo YY Jun f/c 2.8%, 2.8%-prev
• 23:30 CPI, Overall Tokyo Jun 3.1%-prev
• 23:30 Jobs/Applicants Ratio May f/c 108%, 1.08-prev
• 23:30 Unemployment Rate May f/c 3.6%, 3.6%-prev
• 23:50 Retail Sales YY May f/c -1.8%, -4.4%-prev
• 22:45 NZ Trade – Imports* May f/c 4.20b, 3.96b-prev
• 22:45 NZ Trade Balance MM* May f/c 300.0m, 534.0m-prev
• 22:45 NZ Trade Balance YY* May f/c 1.43b, 1.19b-prev
• 22:45 NZ Trade – Exports* May f/c 4.56b, 4.50b-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
