Currency Updates:
AUD/USD Early Europe saw the pair ignore the China data and rally off the 61.8 Fib of 0.8660-0.9505. The lift was aided by EUR/AUD’s fall from above 1.4715 towards 1.4300. As NY got going AUD/USD sat near 0.9015 and the lift persisted. More sales in EUR/AUD down towards 1.4295, this time by a US hedge fund, pushed AUD/USD up above 0.9030. Broad based USD weakness after the miss on US IP data combined with a US bank’s well know tech team cutting their AUD/USD short rec to push AUD/USD above Friday’s close and to a high of 0.9050. A recovery for the USD saw a dip below 0.9020 but late in the day the pair settled near 0.9035 to leave it virtually unchanged on the day. Asia now has RBA Assistant Gov. Kent’s speech and the RBA minutes to contend with. Both events are likely to mention AUD strength but may have only limited impact. The market is waiting on the Fed to see if they lean hawkish on Wednesday. The mkt seems to have built in somewhat hawkish expectations so if Yellen doesn’t deliver, AUD/USD shorts may get a nasty squeeze. Tests of res near 0.9110 and the 200-DMA may then be in order.
EUR/USD Europe applied pressure to EUR. It was mostly on the crosses but EUR/USD did feel the effects. EUR/GBP slid from 0.7984 towards 0.7945 and EUR/JPY slid towards 138.45. EUR/AUD sales from HFs also added pressure. These sales saw EUR/USD fall from near 1.2965 to below 1.2920 before the pair bounced towards 1.2925 into NY’s open. NY pressed further as EUR cross sales persisted, with EUR/AUD sales by HFs the standout, and EUR/USD hit 1.2909. The weak US IP data added pressure to already soft US bond yields and the USD saw some broad based sales. EUR/USD rebounded and some short covering took hold. The s-t macro accounts were noted buyers covering and the pair rallied to a NY high of 1.2952. The USD staged a bit of a comeback and the pair slid below 1.2940 where it sat late in the session. Further short covering cannot be ruled out ahead of major event risk as the mkt still has a large net-short EUR position. The Fed meets Wednesday and the ECB’s first round of TLTROs is scheduled. The mkt seems to have built in some hawkish sentiment from the Fed. If it doesn’t materialize USD longs are likely to bail out. If the TLTRO take up is light EUR shorts likely get squeezed.
USD/JPY USD/JPY opened NY 107.25, traded 107.01/31 and closed the session 107.20. Good bids 107.00 and decent offers ahead of 107.50 barriers had spot hemmed in and the aftermath of a Tokyo bank holiday left the market in no mood to try anything too risky. The FOMC meeting on Wednesday is uppermost on traders’ minds and for now they’re happy with the sidelines. EUR/JPY opened the NY session 138.60, traded a tight 138.47/74 and closed the session a tad higher c 138.68. EUR/JPY was the primary driver there, lows after fresh ECB asset-backed QE comments & a strong US NY Fed idx, highs after US IP, Mfg prod. & Cap Util all missed f/c. The SNB meets Thursday which also has traders a bit edgy in case they match the ECB’s rate cut.
Looking Ahead – Economic Data (GMT)
• No Significant Data
Looking Ahead – Events, Other Releases (GMT)
• 05:30 JP BOJ Governor Kuroda Speech in Osaka
