Currency Updates:
AUD/USD Europe walked in with the pair hovering just above the July 28 low. Light short covering brought the pair up to the 200-hour MA (0.9402) and it sat nearby as NY got going. Broad based USD strength prevailed in early NY even as US bond yields were soft. This saw AUD/USD sold-off early on and break the o/n low. The pair eventually hit a 0.9374 low as US consumer confidence aided to keep the USD firm. Very little bounce was seen and the pair sat near 0.9380 late in the day. Bears seem to be gaining an edge as frustrated longs may be heading for the exits. Day/week RSIs weigh as do narrowing yield spreads. A test of the 0.9355/60 (daily cloud top, 55-DMA) zone looks likely ahead of key event/data risk due from the US. Should these risks be favorable for the USD and lift US yields, AUD/USD should clear that s-t support zone and run for key sppt near 0.9320/30. A break of 0.9320 opens the door to 0.9190/0.9200 where the 200-DMA and May low sit.
EUR/USD An early rise in Europe was rebuffed at 1.3444 as Asian & spec offers touted near 1.3450 kept bulls from pushing too hard. A slip from the day’s high had the pair near 1.3435 as NY got going. US yields were on the soft side but USD strength permeated the mkt. The pair slid right out of the gate and broke the overnight low. Helping the slide was Moody’s downgrade of Deutsche Bank’s senior debt & deposit ratings. USD/JPY’s break above 102.00 emboldened USD bulls and EUR/USD slid towards 1.3410. A slight bounce towards 1.3420 was rebuffed as new sanctions on Russia from the EU were announced. A low of 1.3404 was hit but the 1.3400 barrier protective bids only provided a minimal bounce. This is likely to make defense of the barrier difficult as those protecting the barrier have had little chance to sell the EUR/USD bought to defend. If no serious bounce is encountered soon specs looking to fade a rally might come to market ahead of the key US event & data risk due the rest of this week. Large stops are touted sub-1.3400 and if run the door to the Nov low at 1.3295 opens.
USD/JPY The thin daily Cloud was finally cleared, along with 102 options/offers and the 200-DMA at 102.10. Nikkei gains and demand for longer-term Tsys were the main drivers. A 4-bp rise in US 2-yr yields due to the roll gave front-end traders something to ponder, as did a big jump in US Consumer Confidence. Net spec yen COT shorts are back down to where they were in late ’12 when USD/JPY traded in the lower 80s, but prices will have to break beyond this year’s down TL, Wed at 102.35, on the back of strong US data and growing expectations of Fed tightening to bolster bruised buyers. The last five daily cloud breakouts were short-lived, spending little or no time beyond the upper 21-day Bolli band that’s now expanding toward the ’14 down TL noted above. June Japan IP tonight will set the stage for US Q2 GDP, July ADP and the FOMC announcement ahead of Friday’s NFP. 1-mo vols perking up from record lows, but there’s no clear reversal of this year’s downtrend yet. EUR/JPY fairly stable despite fresh EU sanction against Russia. Month-end rebalancing flows a modest offset. Carry/commodity/EM’s crosses struggled under their own weight.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ Building Consents Jun -4.6%-prev
• 23:50 JP Industrial output prelim mm Jun -1.2%, 0.7%-prev
• 23:50 JP IP Forecast 1 Mth Ahead* Jun -0.7%-prev
• 23:50 JP IP Forecast 2 Mth Ahead* Jun 1.5%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
