Currency Updates:
AUD/USD Europe rallied the pair towards 0.9320 after Asian bids near 0.9290 stemmed the overnight slide. A dip just ahead of NY’s open saw the pair back near 0.9300 but the dip was bought. The USD was generally soft and a large 0.9300 expiry aided to keep bears in check. US yields, the USD and EUR all slid lower in concert on soured risk but AUD wasn’t affected. NY kept pushing the pair up and had it near 0.9330 into Europe’s close. A major sell-off in the USD led by USD/JPY saw a quick spike higher. Stops above 0.9345 were run and a high of 0.9376 was hit. The USD and yields remained near the day’s lows so AUD/USD only saw a slight pullback from the day’s high. Late in the day it sat near 0.9355. Traders now focus on Oz jobs due later. The U. Rate is f/c to stay unchanged but the employment number is f/c at 12k vs. the prior 15.9k. Should the jobs data come in weak, AUD should turn soft as the RBA may have to alter its neutral view on rates. A bad number may see today’s gains erased and put the key 0.9180/0.9205 zone back in play.
EUR/USD Weak German factory orders for June combined with Italy’s Q2 GDP contraction to drive EUR/USD to a new trend low (1.3333) just before it bounced to 1.3345 into NY’s open. NY saw short covering early as bids into a 1.3325 barrier, the weekly cloud base (1.3317) and the Nov low would go unfilled due to general USD weakness. Short covering persisted into Europe’s close with the pair reaching 1.3360. USD/JPY’s wash-out through the 200-DMA and eventual run to 101.77 saw broad based USD sales ensue. EUR/USD hit a 1.3387 high. Only a small pullback was seen as the pair sat near 1.3380 late in the day to leave the pair up tiny on the day. A further squeeze can’t be ruled out as the daily RSI diverged & a doji forms on today’s candle. Bears hope the ECB will prevent a squeeze as some expect Draghi to up the dovish talk after HICP was below f/c and today’s data set showed the EZ econ weakening. IF Draghi doesn’t deliver a dovish message shorts are in for trouble. We may then see a quick more to 1.3485/90 where the July 24 high and 21-DMA sit. Above 1.3490 eyes 1.3550.
USD/JPY never stood a chance as the markets’ attention was focused on the meltdown in European equities and the attendant move lower in DM interest rates after a bad miss in German Industrial Orders and a negative print for Italian GDP. As one would expect, JPY and CHF were the flavors of the day. However, the highlight of the session was a midday drop down the elevator shaft in USDJPY as a break of the 200 dma (102.24) triggered a large futures liquidation. It pulled the USD lower across the board. Fat fingers were blamed at first but seeing the pair still hasn’t recovered, I’m inclined to think it was a legitimate trade; a long liquidation as real money starts to become concerned that the top in stocks might be in. USDJPY held Fibo and the 40 dma support for now, both of which are right around 102.84 and represent the last foothold before a run back to the lows.
Looking Ahead – Economic Data (GMT)
• 23:30 AU AIG Construction Index Jul 52-prev
• 23:50 JP Foreign Bond Investment w/e -302.0b-prev
• 23:50 JP Foreign Invest JP Stock w/e 204.5b-prev
• 23:50 JP Foreign Reserves Jul 1283.90b-prev
• 1:30 AU Employment* Jul f/c 12000, 15900-prev
• 1:30 AU Full Time Employment* Jul -3800-prev
• 1:30 AU Participation Rate* Jul f/c 64.7%, 64.7%-prev
• 1:30 AU Unemployment Rate* Jul f/c 6%, 6%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events.
