Currency Updates:
AUD/USD A tight range held for most of Europe. They did try a run above 0.9360 but failed to gain much ground as solid offering interest was noted above the recent high and into 0.9400. A slide took the pair to the day’s 0.9332 low just ahead of NY’s open. Early NY saw limited action with the pair lingering near the low. A quick blip up near 0.9355 took hold on month-end USD sales but the rally was short lived. The USD staged a nice rally in the afternoon as EUR/USD made a new low for 2014. AUD/USD turned heavy and sat just above the day’s low late in the session. Action for AUD may increase significantly as there is major event and data risk due. The RBA meets and it’s likely Stevens will mention AUD’s strength again. He may have to bolster his rhetoric though as the market is mostly ignoring recent rhetoric. On the data front Q2 GDP and July retail sales and trade data are due. Should the stars align in favor of bears a retest of 0.9230/40 support is likely. If that is cleared bears will try their luck at key 0.9175/0.9200 support where the 200-DMA and May low sit.
EUR/USD Europe rallied EUR/USD after EZ inflation data was basically inline with estimates. Short covering ensued and the pair lifted towards 1.3200 ahead of NY’s open. Anticipation of USD month-end sales likely aided the lift. NY had other thoughts on their minds though. They immediately pushed the pair lower even as US consumer spending data dented the USD a bit. The pair slid just below 1.3170. The slide look to have been aided by Goldman Sachs lowering their 3, 6 and 12 month EUR/USD f/c to 1.29, 1.25 and 1.20 respectively. Month-end USD sales did emerge into 11 a.m. hour but bears quickly took over and sold aggressively. they cleared the 1.3150 and ran stops below it. A new trend low was set for the pair. there was little relief as the pair sat just above 1.3136 late in the day. It appears traders won’t wait for ECB action to unload EUR. With BNP, RBS, Nomura and JPMorgan now expecting an ECB cut sentiment grows that some form of easing action will take place next week. A test of 1.3100 is likely pre-ECB. If that is cleared a quick run to 1.3000 may be in order.
USD/JPY Nothing stood in the way of the USD bulls in a quiet pre-holiday NorAm session. A bad miss on Japanese Housing Starts (-14.1%) and continued pressure on JGB yields below 0.50 bps added fuel to the debate about the faltering state of the economy, with markets pricing a greater possibility of more QE (and a weaker yen). Today marked the highest weekly/monthly close since January and the monthly chart completed a breakout higher of a bullish pennant formation. Many sellside strategy groups are raising their sights to 110, but the more immediate hurdle comes at the .618 fibo of the 2007-2011 downtrade (105.48) and which also happens to be the January highs.
Looking Ahead – Economic Data (GMT)
• 18:45 NZD Q2 Terms of Trade f/c -2.3% prev +1.8%
• 18:45 NZD Q2 ToT Exp vol f/c -3.0% prev +1.5%
• 18:45 NZD Q2 ToT Imports f/c -1.4% prev -0.94%
• 18:45 NZD Q2 ToT Exports f/c -3.3% prev +0.76%
• 19:50 JPY Q2 MOF Business Capex y/y no f/c prev 7.4%
• 20:30 AUD Aug TDMI monthly inflation gauge no f/c prev 0.17%
• 21:00 CNY Aug NBS Mfg PMI f/c 51.2 prev 51.7
• 21:45 CNY Aug HSBC Mfg PMI Final no f/c prev 51.7
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
