Currency Updates:
AUD/USD The post-RBA gains faded in Europe as traders focused more on China’s non-mfg PMI miss and broad based USD strength. Europe slid the pair from above 0.9340 towards 0.9325 into NY’s open. NY pressed the pair lower as the recent US yield slip abated and the USD remained firm. The pair got another push to the downside after US non-Mfg PMI came in well above f/c and at the highest reading since 2005. AUD/USD went on to hit a 0.9294 low. Little bounce was seen as risk sentiment was sour due to soft US equity mkts. Late in the day the pair sat just above 0.9300. There is little in the way of data to drive the pair overnight. Some impact might be felt off NZ jobs data due to AUD/NZD moves but AUD traders have most of their focus on the Oz jobs and RBA’s SOMP due later this week. IF results of those events are bearish for AUD, the pair should clear last week’s low. Once cleared bears target 0.9182/0.9203 where the 200-DMA, 38.2 Fib of 0.8660-0.9505 and May low sit. Day/week RSIs are biased down and won’t impede bears if they decide to take the pair lower.
EUR/USD Above f/c EZ services PMIs & above f/c retail sales results were ignored by Europe as broad based USD strength prevailed. A sharp sell-off saw RM bids into the 1.3400 area filled & the pair slip towards 1.3690 into NY’s open. Recent US bond yield weakness wasn’t evident in early NY & the USD stayed generally bid. EUR/USD’s slide pushed further in NY & accelerated after US non-Mfg PMI came in above forecasts (highest since 2005). Bond yields rallied, USD/JPY spiked up to 102.93 & EUR/USD hit a 1.3358 low. Profit taking from spec names & 1.3350 barrier protective bids halted the slide. Risk sentiment soured quickly in NY’s afternoon as equity mkts tanked & US yields gave back some earlier gains. EUR/USD rebounded off the low just a bit to sit near 1.3375 late in the day. The new trend low keeps the bearish bias intact as do day/week RSIs providing negative momentum. Bears feel confident and that is evidenced by their selling ahead of the ECB Thurs. Should Draghi up the dove talk bears will press further. 1.3295/1.3317 (Nov low, weekly cloud base) are then targeted.
USD/JPY USDJPY followed bond yields on a roundtrip route that ended with the pair essentially flat on the day. The early stock and yield (and USDJPY)bounce faded as Europe continued to underperform global equity markets, with the broad Eurostoxx index dipping into negative territory YTD. Amidst some talk of renewed Ukraine tension, the Dow Industrials then followed suit (negative YTD) as wider credit and lower commodities weighed on risk sentiment. Macroeconomically, the market is still inclined to sell Yen as falling JGB yields and some second guessing from the BOJ sets up a scenario where investors will start looking for another easing in October. But during the NorAm time zone the USDJPY trades as an interest rate derivative to the exclusion of nearly everything else. Support is still clustered nearby with the trendline (102.40), the 200 hma (102.32) and the 200 dma (102.22).
Looking Ahead – Economic Data (GMT)
• 10:45 PM HLFS Unemployment Rate* Q2 f/c 5.8%, 6%-prev
• 10:45 PM HLFS Job Growth QQ* Q2 f/c 0.7%, 0.9%-prev
• 10:45 PM HLFS Participation Rate* Q2 f/c 69.3%, 69.3%-prev
• 10:45 PM Labour Cost Index – QQ* Q2 f/c 0.4%, 0.3%-prev
• 10:45 PM Labour Cost Index – YY* Q2 f/c1.6%, 1.6%-prev
• 5:00 AM Coincident Indicator MM* Jun 0-prev
• 5:00 AM Leading Indicator* Jun -0.8-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events.
