Currency Updates:
AUD/USD The mkt ignored the improved China PMI data and steadily slipped AUD/USD lower in Europe’s morning. Traders were anticipating a US jobs report that would ignite another rally for an already buoyant USD. Bears pushed the pair to 0.9275 just as NY got going and the pair sat just above that low into the jobs report. The disappointing jobs data sent bears scrambling to cover. AUD/USD quickly lifted above 0.9325. A slight dip met buyers as US yields plummeted. The pair then hit a session high of 0.9336. The above f/c ISM sent the pair back to 0.9300 but that slide faded. The USD couldn’t gain any traction as bond yields stayed soft. AUD/USD climbed and the pair sat near 0.9315 late in the day. S-T technicals suggest a bounce may be due. A new low was set but daily RSI diverged and a doji candle formed. Spreads narrowed a bit as well & may aid that bounce. Upcoming AU event/data risk (retail sales, jobs, RBA decision & SOMP) may elicit further short covering as the pair had a fairly significant drop in a short amount of time. Bulls need above 0.9505 to take full control of this pair.
EUR/USD Light short covering in Europe’s morning lifted EUR/USD from below 1.3380 to 1.3402 just ahead of NY’s open. Hawkish comments from the Dallas Fed’s Fisher saw the pair pressed below 1.3390. The combination of NFP’s miss, uptick in the U rate and below f/c average hourly earnings dealt a blow to USD bulls that disregarded comments from Wednesday’s Fed statement regarding labor slack. The USD dived as US yields tumbled. EUR/USD spiked above 1.3430 before dipping towards 1.3410. The dip was bought & a high of 1.3445 was then hit. July’s ISM beat took some shine off the rally but the drop in June construction spending aided to keep the USD soft. Late day profit taking gave the USD some relief and the pair sat just below 1.3430. Today’s action sees EUR/USD back at the 200-WMA after rebounding off the 50% Fib of 1.2740-1.3995. Daily RSI has turned from o/s while weekly diverged. The risk of a short squeeze exists. There is little data due next week that would halt a squeeze. Shorts may cover until the ECB on Thurs. The l-t trend remains bearish and bulls need >1.3700 to chase away the bears.
USD/JPY There was no posting a daily close above 103 this week after today’s US jobs report came in softer than expected with components that favored the Fed’s cautious approach to normalization. PMI was above f/c, but Construction Spending tumbled, leaving end-of-week position paring to persist into the London close. Prices hit bottom after retracing 38.2% of the July rise and coming close to retesting this year’s down TL that was broken above on Wed. USD/JPY was heavily overbought on the daily studies heading into today’s event risk, making a correction almost inevitable. Tsy yields and USD/JPY vols fell, as did stocks initially, but the latter attracted bargain-hunting after the London and NY midday fixes. There’s logic in that, due to the drop in yields and the firm-but-not-Fed-tightening-frothy US data du jour. In any case, the worst-case correction scenario near-term would be a 61.8% retrace of the July rise to 101.88 & daily Cloud by 101.90 next week. EUR/JPY yet to close above the Kijun & 50% Fibo at 137.83. GBP/JPY pierced the July lows, 50% Fibo & the daily Cloud top, but not the June 30 low. Weak Japan Markit PMI keeps focus on post-tax-hike slump.
Looking Ahead – Economic Data (GMT)
• 01:30 ANZ Newspaper Job Ads Jul -2.3%-prev
• 01:30 ANZ Internet Job Ads Jul 4.5%-prev
• 01:30 Retail Sales MM Jun f/c 0.4%, -0.5%-prev
• 01:30 Retail Trade* Q2 f/c -0.5%, 1.2%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
