Currency Updates:
AUD/USD Europe lifted the pair off Asia’s low as the sour risk sentiment from the air strike new and SOMP faded. The pair lifted from the 0.9240 area and sat just above 0.9270 into NY’s open. The shift in risk sentiment carried over to NY and saw AUD/USD lift to a 0.9288 high but the pair couldn’t get the full benefit of the improved sentiment. EUR short covering saw EUR/AUD lift from 1.4420 towards 1.4480 and USD/JPY lifted towards 102.10. This combination kept AUD/USD from making further gains. Late in the day AUD/USD sat near 0.9275. the longer-term trend remains bearish but the doji formed August 8 may lead to a squeeze. Traders look to next week’s AU July NAB business confidence, Q2 house prices and August consumer sentiment releases for the next cues. Should the results come in soft they will bolster the RBA’s SOMP lowered growth outlook and may see AUD weighed upon again.
EUR/USD The sour risk brought on by the US air strike news couldn’t gain traction in Europe’s morning. Right out of the gate the pair lifted from below 1.3360 & hit 1.3408. EUR/USD dipped back below 1.3380 & sat sub-200-HMA into NY’s open. Risk sentiment improved further as equity markets were set to open higher & JPY weakened further. EUR/USD held near 1.3395 in early NY but short covering by bears frustrated that Draghi’s jawboning failed to sustain a drop ignited a run on stops above 1.3410. The run quickly hit a 1.3433 high. Aiding the lift was EUR/JPY’s break of 136.65/70 on it’s way to a 136.89 high. EUR/USD pulled back a bit from its high but reports that Russian military drills near Ukraine were over aided to keep the pair solidly in the green on the day. The pair sat just above 1.3410 late in the day. Techs suggest shorts might get squeezed further. Daily RSI is biased up & long lower wicks on the last two weekly candles suggests bulls are putting up a fight. The lift may resume early next week but EZ July CPI & German Q2 GDP data may stall the lift if they come in below estimates.
USD/JPY completed a roundtrip from 102.00 down to 101.50, and then back again as the pair correlated almost perfectly with broader movements in the stock and bond markets. Overnight fear abated as US airstrikes in Iraq were limited and Russia ended it’s military exercises on the Ukraine border, sending bears running for cover. Bunds and US 10 yr notes still closed at new low yields on the year and should be taken as a sign that, regardless of the state of play in various geopolitical hotspots, all is not right with the global macro condition. Short yen trades (especially EURJPY) may have been saved for today but look increasingly vulnerable as carry strategies will stay under pressure as the Fed recedes and BOJ and ECB easing schemes are proving to be ineffectual.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ Elec Card Retail Sales mth Jul 0%-prev
• 22:45 NZ Elec Card Retail Sales YY* Jul 4%-prev
• 05:00 JP Consumer Confid. Index* Jul 41.1-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
