Currency Updates:
AUD/USD recovered along with a generally softening of the USD after the Asian grab-a-thon in response to the hawkish turn in the latest issue of Fed meeting minutes. The US fixed income markets are expecting Ms Yellen’s speech at Jackson Hole to be more dovish than the committee’s view, which led to some paring of long USD positioning in the NorAm session. The Aussie-US rate differential continues to be fairly stable and thus the Oz is not attracting much attention as some of the other major currency pairs, which offer better trading opportunities. And until the AUDUSD can get legs away from .9300, that will probably continue to be the case.
EUR/USD A new trend low of 1.3242 was carved out in Asia, but by then the USD bid from the Fed Minutes had been priced into a market that remains oversold and heavily net spec short EURs heading into Yellen and Draghi’s Jackson Hole speeches on Friday. EZ econ data Thursday were below f/c, again, and USD data were all better than expected, but there weren’t enough new, eager EUR/USD sellers to retest the o/n lows. Those lows landed between the 38.2% of the ’12-’14 rise at 1.3249 and the 61.8% of the ’13-’14 rise at 1.3219. Offers aplenty are noted at 1.3285-300 and again into the weekly Cloud base at 1.3317 and 1.3330, with stop above there. The thinking is Yellen will have to be very convincing in her arguments against tightening too soon to weaken the dollar. Another view is that in the dual contest for yield & safety, the USD still wins versus the EUR and the yen, regardless, and that Draghi will be dragged kicking and screaming toward QE over the M-T. Keep in mind that the real cost of EZ govt debt servicing has fallen from post-crisis peaks, but remains well the ’12 lows and prevailing pre-crisis levels.
USD/JPY NorAm traders came in to see USD/JPY backing away from the o/n peak at 103.96, which is the underside of the broken up TL from Jun and Oct ’13 lows. It’s also just below the April peak at 104.13 and 104 option barrier defenses. Japanese data du jour were mostly on the bright side and MOF flow data tended to confirm reports from Nikkei of Japan Post upping its foreign asset buying. GPIF and other pensions are said to be in line to do the same come Sept. Despite a strong grouping of US econ data Thursday, the USD was too overbought to push higher in NY ahead of the Jackson Hole event risk. There was a minor dip to the hourly Kijun support at 103.60 that was eagerly scooped up by those who missed this week’s breakout above 103. EUR/JPY ran into resistance at 137.94 from the daily Cloud base and the upper 21-day Bolli band; that despite another round of subpar econ data from the EZ. GBP/JPY is loitering just below its daily Cloud base at 172.42. Nothing to speak of on Friday’s calendar other than the Jackson Hole event.
Looking Ahead – Economic Data (GMT)
• No Significant data
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
