Currency Updates:
AUD/USD Europe rallied AUD/USD towards 0.9390/95 resistance after another attempt to break below the daily cloud and 0.9320/30 support failed in Asia. Early NY was quiet until Canadian CPI came out above f/c. commodity currencies went bid across the board after the data. AUD/USD spiked up to 0.9411 and shook out some weak hands. The pair quickly reversed those gains though as the USD went bid against most of the major currencies with EUR & GBP the biggest losers. from the high, AUD/USD dived down to 0.9366 but no further losses were possible. EUR/USD’s break below 1.3500 saw minimal follow through and risk sentiment improved to send US equities higher. AUD/USD climbed for the rest of the session and sat near 0.9395 late in the day. AUD/USD bears are frustrated and may get squeezed further as daily RSI turns up and the cloud cannot be broken. A long lower wick on the weekly candle suggests bulls are putting up a fight as well. Stops are noted above today’s high and if run 0.9455/60 is targeted. RBA speeches from Stevens & Debelle plus Oz Q2 CPI present risks to bullish sentiment next week.
EUR/USD A quiet overnight session quickly erupted into a bearish frenzy. After sitting in a tight near-20 pips range EUR/USD dived in early NY. The action seemed ignited by a double shot of bad news out of the EZ. Belgium consumer confidence hit the lowest reading in 11 months as came in at -10 (prv -7) and Bank of Italy lowered 2014 GDP estimates to 0.2% from 0.7% “with risks to the downside”. EUR/USD filled the sov bids into 1.3500 and cleared the 1.35 barrier. It quickly hit a low of 1.3491. Bears couldn’t push further though as profit taking from a market already short stemmed the slide. A quick bounce back above 1.3500 ensued and the bounce persisted as risk sentiment improved and stock market s rallied. EUR/USD briefly traded above 1.3530 before pulling back near 1.3525 late in the day. Bears face some risks now. The TL off the 2012 low was pierced but losses below it couldn’t be sustained, a doji forms on the daily candle while RSI diverges on the new trend low. while the l-t trend is bearish a short squeeze cannot be ruled out. A test of 1.3610/30 resistance cannot be ruled out.
USD/JPY Another week is ending with USD/JPY still stuck in dwindling ranges above seemingly indefatigable support by 101. Thur’s risk-off flows reverses and mean reverted o/n, including Tsy yields, which recovered most of Thur’s losses, regardless of soft TR/UM & LEI. A decent US earnings season and Thur’s report from the Fed that US bank loans & leases expanded at a 7.7% annualized rate in Q2 keep some focus on the timing of Fed tightening, but Friday was more about booksquaring into the w/e after Thur’s geo-pol derisking jag. As such, the yen was offered from Asia onward. USD/JPY’s 101.09 low 3 pips above the July 10 nadir, and at the lower 21-day Bolli for a second day running, was the cue to cover. Japan’s long w/e helped. As usual, topside was limited as vols fumble around record lows. Offers strewn between 101.45 and 101.80. EUR/USD’s flail below 1.3500 yanked EUR/JPY briefly to a 136.72 low. This year’s 136.25 low is getting close enough to sway the risk/reward analysis for would-be seller and those with hefty short profits. AUD/JPY finished a 61.8% of May-Jul rise by 94.34. NZD/JPY held its up TL fm ’12. Japan Trade and CPI are out on July 23 & 24.
Looking Ahead – Economic Data (GMT)
• 22:45 NZD June Visitor Arrivals y/y no f/c prv 5%
• 23:01 GBP July Right Move House Price Index y/y no f/c prv 7.7%
• 23:01 GBP July Right Move House Price Index m/m no f/c prv 0.1%
Looking Ahead – Events, Other Releases (GMT)
• Nothing major scheduled
• Japan holiday (Marine Day)
