Currency Updates:
AUD/USD Aussie couldn’t recover from overnight losses during the NY session. Europe had added to Asia’s losses and had AUD/USD sit just below 0.9290 into NY’s open. An early NY dip below 0.9280 met buyers and the pair rebounded near 0.9290. Aiding the lift towards 0.9290 was a lift in AUD/NZD after the weak Fonterra milk auction. The bounce was short lived though as US ISM data was well above f/c and commodity currencies were heavy across the board. The floor fell out from under AUD/USD and it quickly hit a 0.9268 low. Only a slight bounce was seen though as the USD and US yields maintained most of the day’s gains. The pair sat near 0.9275 late in the session. Traders now look to Oz Q2 GDP and RBA’s Stevens’ speech to CEDA. GDP is expected to deteriorate from its prior result and Stevens is likely to jawbone AUD lower if he mentions it. These factors should weigh on the pair and we may see key s-t support near 0.9240 tested. If that is cleared bigger support in the 0.9175/0.9200 (200-DMA, May low) is the next hurdle for bears.
EUR/USD Europe pushed EUR/USD to a new trend low as it reached 1.3110. The pair sat just above that low as NY got going. Further losses weren’t possible during NY hours even as the USD mounted serious gains vs. other major ccys. Short covering in many EUR crosses and JPY weakness combined with solid EUR/USD bids sitting 1.3110-10 to see EUR/USD lift slowly from the lows. Above f/c August ISM data allowed a small slip but the rise persisted. The lift stalled just ahead of 1.3135 though as offers touted in the 1.3135/45 loomed and EUR/JPY’s rally fizzled out. Late in the day EUR/USD sat just above 1.3125. The trend remains bearish but short squeeze risk is extant. Traders may lighten up on large short positions that have been built recently. The ECB is due Thursday and the market seems to have priced in action by the bank. Some of that positioning may get unwound ahead of the meeting. Stops are touted above 1.3140/45 and may come into play if the pair can’t break below today’s low soon.
USD/JPY The gap on this year’s 105.45 high in USD/JPY is rapidly being filled. 105 had already been breached before the NorAm session began. Stellar US ISM results flushed out stops just north of that figure for a 105.22 high thus far. Also cleared today was the ancient down TL from the ’98 and ’07 peaks at 104.78. That just leaves 105.45 and the 61.8% of the ’07-’12 crisis tumble at 105.49. Talk of barrier defenses there and stops beyond. Many banks are now looking to 110 as a M-T target. Surging Tsy yields and Nikkei prices underpinned USD/JPY amid speculation Abe’s rumored new Welfare Minister will back major GPIF reallocation shifts. A Nikkei story late in the NY session cast some doubt on how much influence any such shift might have. Note that some are betting against the yen because they see the ball falling back in the BOJ’s court to revive reflation efforts, while others worry the yen could slide due to worsening finances and rising trade deficits. Even the widely detested EUR made a nice comeback v the yen today, trading beyond the Aug 1 range high of 138.07. Lots of angst among EUR shorts into Thur’s ECB. Yen still seen a safer short.
Looking Ahead – Economic Data (GMT)
• 19:30 AUD Aug AiG Performance of Services Index no f/c prev 49.3
• 21:00 CNY Aug Non-Mfg PMI no f/c prev 54.2
• 21:30 AUD Q2 GDP q/q f/c 0.40% prev 1.1%; y/y f/c 3.0% prev 3.5%
• 21:30 AUD July Retail Sales m/m f/c 0.40% prev 0.60%
• 21:45 CNY Aug HSBC China Services PMI no f/c prev 50.0
Looking Ahead – Events, Other Releases (GMT)
• 22:30 AUD RBA’s Stevens addresses the Committee for Economic Development of Australia
