Currency Updates:
AUD/USD Europe walked in and saw the pair couldn’t break through 0.9320/30 support or the thin daily cloud and began some light short covering. From the 0.9329 low they pushed the pair near 0.9345 as NY got going. NY continued the slow & steady squeeze even as AU-US 2 year yield spreads narrowed further. The squeeze saw a NY high near 0.9365. Aiding the lift was pressure in EUR/AUD as EUR was offered across the board. EUR/USD tested support near 1.4440 and held just above that support late in the day. AUD/USD’s squeeze relented a bit in NY’s afternoon and the pair sat near 0.9360 towards the close. Bears are gaining some confidence as daily & weekly RSIs weigh and spreads narrow. They may get a boost later as NAB Q2 Business Confidence is due. RBA Assistant Governor Edey speaks as well. It’s possible comments echoing recent rhetoric from other RBA staff might be echoed. A break below 0.9320/30 puts bears fully in control. They would then target the 0.9195/0.9205 area where the 200-DMA and a series of daily lows sit.
EUR/USD Europe’s bears pressed EUR/USD lower through their morning. EUR sales inspired mostly by EUR/GBP selling after UK jobs initiated EUR/USD’s slide. Selling began near the 1.3570 area and continued into NY’s open where the pair sat just below 1.3540. The June PPI was above f/c and the USD and US bond yields got a bid as mkt fears of earlier than anticipated rate hikes grew. EUR/USD slipped to 1.3525. A bounce ensued as US yields slipped a bit. Softer than f/c IP and cpacity rates for June aided to soften yields and the USD. EUR/USD touched 1.3540 but sellers emerged. A steady decline took hold, aided by EUR sales vs. AUD & CAD, and the pair sat just above the day’s 1.3521 low late in the day. Bears now look to EZ & US data tom for further help. EZ June CPI is due & the US gives us weekly claims data as well as June building permits & housing starts data. Should CPI come in soft & the US data reflect recent upbeat US data EUR/USD is likely to test the 1.3475/1.3505 support zone. A break of that area likely accelerates the recent slide. Bears then target Nov’s low (1.3295) then Sep’s low (1.3105).
USD/JPY Another tight but higher range for USD/JPY between support at 101.64 (daily Tenkan and 200-HMA) and resistance at 101.80 (offers tied to the 61.8% of the 102.27-101.06 slide). US data were mixed but the Tsy curve flattened on expectations of eventual Fed tightening; a prospect today’s Beige Book appeared to reinforce. More offers are noted into the 200-DMA and daily Cloud base by 102, with light stops above. Far more active was EUR/JPY via a second wave of EUR selling that breached the July 10 nadir of 137.50 by a pip in NorAm trading. That result came despite tighter EZ peripheral spreads and hefty rallies in EZ equities. ECB reported waning reserve manager demand for the EUR in recent qtrs, despite rising total reverse needing to be diversified rising. A below f/c EZ Trade surplus also reminded of EUR risks in a NIRP ECB environment. A clear break below 137.50 would target the weekly Bolli by 137 last. NZD/JPY was the other big loser after tumbling Fonterra milk prices and volumes and below F/C Q2 CPI dimmed RBNZ rate hike hopes. Decent support by 88.20 there. MOF & Dept Store sales from Japan tonight.
Looking Ahead – Economic Data (GMT)
• 23:30 JP Reuters Tankan DI Jul 19.00-prev
• 23:50 JP Foreign Bond Investment w/e -287.1b-prev
• 23:50 JP Foreign Invest JP Stock w/e 330.9b-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
