Currency Updates:
AUD/USD could hardly get off the mat during European and NY hours after the disappointing jobs report. The pair drifted slightly higher from the day’s 0.9259 low during Europe’s morning and eventually hit 0.9283 heading into NY’s afternoon. The pair slide from NY’s high and sat near 0.9270 late in the day. The rise was aided by soft US yields and EUR/AUD’s drop from above 1.4440 towards 1.4380 after ECB’s Draghi tried to talk down EUR. The fact that AUD/USD couldn’t garner further gains is a bad signs for longs. Poor price action like that suggests bears may not let the pair come up for aid while having their sights on key support near 0.9180/0.9200. Tonight’s RBA SOMP may help bears in their cause. Recent AU data has been less than stellar. The report may highlight downside risks to the econ and see the RBA lean towards a dovish stance instead of their current neutral rate path. A dovish statement likely sees AUD/USD test that support down below. If it happens to break bears then turn their attention to supports near 0.9050 and 0.8890/00
EUR/USD Europe was quiet pre-ECB. Rates were unchanged & EUR/USD held just below 1.3375 into Draghi’s presser. A mention of intensified prep work on ABS by Draghi early in his presser saw algos take the baton & run. The pair sank near 1.3350. As Draghi continued he wasn’t throwing bears anymore bones. A squeeze saw an approach near the 200-HMA as 1.3394 was hit. Draghi then jawboned EUR lower. He noted fundamentals for a weaker FX rate are much better now while also noting that monetary policies in the EZ and US are diverging & will do so for a long time. EUR/USD dived down to 1.3337. Increased sour risk sentiment (JPY strength, lower US yields & stocks) aided the slide. EUR/JPY suffered as well as it neared key 136.00/25 support. EUR/USD managed a slight bounce & sat near 1.3360 late but EUR/JPY saw little relief as it sat just above 136.30. Draghi now hopes for solid US data so rising US yields can push USD up. He may have to wait as there is no major data due until next Wednesday. Should geopolitical risks increase EUR will be under pressure as Draghi noted they will impact growth. EUR may stay heavy into the weekend on as traders fear that risk possibility.
USD/JPY Yen strengthened across the board as stocks and rates fell sharply. The ECB declined to engage any further easing despite acknowledging downside geopolitical and economic risks. This is not what global equity markets wanted to hear as a key tenet of the Street’s consensus bullish posture rests on European QE. USDJPY faded against yesterday’s pivot point at 102.45 but the larger story lies in EURJPY, sitting at the year’s lows and what that might mean as a global risk benchmark. (10 yr US treasuries at new closing low yields being another) The debate continues over the origin of yesterday’s spike in yen futures. Given the gathering momentum downward in stocks I reckon that, although clumsily handled, it was a legitimate long liquidation and something we’re likely to see more of as short yen strategies look increasingly vulnerable.
Looking Ahead – Economic Data (GMT)
• 23:50 JP Bank Lending YY Jul 2.3%-prev
• 23:50 JP Current Acct NSA JPY* Jun f/c -324.3b, 522.8b-prev
• 01:30 AU Housing Finance Jun f/c 0.5%, 0%-prev
• 01:30 AU Invest Housing Finance* Jun -0.9%-prev
• 02:00 CN Exports YY* Jul f/c 7.5%, 7.2%-prev
• 02:00 CN Imports YY* Jul f/c 3%, 5.5%-prev
• 02:00 CN Trade Balance* Jul f/c 27.00b, 31.60b-prev
• 05:00 JP Economy Watchers Poll* Jul 47.7-prev
Looking Ahead – Events, Other Releases (GMT)
• 04:00- Bank of Japan Interest rate Decision f/c 0.0%, 0.0%-prev
