Currency Updates:
AUD/USD Europe attempted a break of s-t resistance near 0.8720/30 but failed as they could only reach 0.8717. A drift lower had the pair near 0.8690 as NY got going. Early NY saw the pair dive lower after the solid US retail sales data. The 200-HMA was pierced and a 0.8648 low hit. A bounce ensued as the USD weakened across the board and the pair lifted back above the 200-HMA. The above f/c U. of Mich. data weighed a bit on the pair but not enough and shorts covered in earnest as a wave of USD sales flooded the market. AUD/USD spiked higher and ran stops above 0.8730. The follow through continued into NY’s afternoon and the 61.8 Fib of 0.8912-0.8540 and the Nov 3 high were pierced. A high of 0.8774 was hit. A slight pullback had the pair just below 0.8760 late in the day. the 0.8765/70 zone was pierced but the rally couldn’t hold above it. However, more gains may be due as the pair holds above the 10 & 21-DMAs and a long lower wick is formed on today’s candle. A test of October’s high cannot be ruled out before the longer term bear trend resumes.
EUR/USD Europe rallied EUR/USD from near 1.2430 & pierced the 200-HMA but couldn’t hold above it. A drift lower saw 1.2445 as NY got going. Sharp bear pressure was applied early after US retail sales were solid. EUR/USD hit a low of 1.2398 before a bounce near 1.2420 took hold. The above f/c TR/U. of Mich report weighed a bit but when it was clear it wouldn’t be enough to inspire another leg up for the USD, longs began covering. This saw EUR/USD shorts scramble to cover. The highs in Asia & Europe were easily cleared before the pair paused briefly near 1.2500. When no serious pullback from that area was seen shorts covered further. Stops above 1.2525/30 were then hit and a high of 1.2546 was made. The USD slide abated somewhat and EUR/USD slipped lower to sit near1.2525 late in the day. Technically the pair looks like it can rally further as a bullish outside candle forms today, day/week RSIs are biased up and we’ll see a close above the 10-DMA. Draghi makes a statement at the quarterly hearing of the Committee on Economic & Monetary Affairs. It’s likely he’ll be dovish and the squeeze may come to an end.
USD/JPY The NY day began well for USD/JPY. US Retail Sales were above f/c and revised upward, giving prices a lift to the 116.83 session highs, where AXJ names were said to be fading the move, looking for a quick trip back to 116.00 to take profit. There was a second rally attempt after the strong TR/UM report, but the dollar ran into widespread selling between 10 and 11 ET, led by short p/t and covering in EUR/USD. Initial comments from Fed’s Bullard also were construed as USD bearish, but he later reiterated his view that rates will begin to rise by the middle of next year. Failure to take out the 117 barriers, after running stops above 116.50 barrier in early NorAm trade, also left USD/JPY longs looking to lighten up a touch ahead of Monday’s Japan GDP release, as that report, assuming it’s not much stronger than forecast, is expected to allow Abe and the LDP coalition to call early elections and at least delay next year’s VAT rise. EUR/JPY surged beyond the Dec ’13 peak at 145.67 amid the EUR/USD short squeeze. Some see the huge spec short EUR positioning as kindling for more of the same on top of the QQE2 and GPIF driven yen selling flows.
Looking Ahead – Economic Data (GMT)
• 16:00 CN FDI (YTD) Oct -1.40%-prev
• 21:45 NZ Retail Sales Volumes QQ* Q3 f/c 0.85%, 1.20%-prev
• 21:45 NZ Retail Qrtly Vs Yr Ago* Q3 f/c 4%, 3.80%-prev
• 23:50 JP GDP QQ Q3 f/c 0.5%, -1.80%-prev
• 23:50 JP GDP QQ Annualised Q3 f/c 2.1%, -7.10%-prev
• 23:50 JP GDP QQ Pvt Consmp Prelim Q3 f/c 0.8%, -5.10%-prev
• 23:50 JP GDP QQ Capital Expend. Q3 f/c 0.9%, -5.10%-prev
• 23:50 JP GDP QQ External Demand Q3 f/c 0.1%, 1.10%-prev
• 0:30 AU New Motor Vehicle Sales m/m* Oct 2.90%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
