Currency Updates:
AUD/USD The below f/c China PMI wasn’t enough to inspire bears to seriously test the 2014 low. A bounce off the 0.8565 area ensued in Europe as the USD began seriously slipping after USD/JPY couldn’t break 119.00. AUD/USD climbed and sat near 0.8615 as NY got going. With US CPI above f/c and jobless claims better than f/c AUD/USD dipped in early NY. Buyers emerged in the 0.8590 area and a steady ascent took hold as the USD couldn’t mount any meaningful bounce in NY. AUD/USD hit a 0.8641 high in NY but saw only a small pullback as it sat just above 0.8630 late in the day. The pair may squeeze higher in Asia as there is little data and the market may focus on the technical picture. A bullish hammer candle formed today and RSI turns from near oversold territory. If today’s USD slide persists overnight we might see AUD/USD test the 0.8720 area as recent shorts might cover.
EUR/USD Price action in early Europe defined the range for the continent and NY. EUR/USD dived down from 1.2575 to 1.2505 after EZ PMIs were generally below expectations. Short covering bids into 1.2500 were too much to overcome and the pair steadily climbed towards 1.2535 as NY got going. Early NY action saw the low end of the range tested again after US CPI came in above f/c and jobless claims were below estimates. The dip was bought though as USD weakness from overnight carried over into NY’s session. Another trip near the day’s high was made but the range held. The pair then oscillated within the day’s range for the remainder of the session. There is no major data overnight that might inspire bears to push EUR/USD lower so it’s possible short covering dominates. With the pair holding above the 10 & 21-DMAs short covering risk is upped. Draghi does speak at 09:00 CET tomorrow so there is some danger the pair drops as any remarks he makes on economic risks are likely to be dovish.
USD/JPY The late Asia spikes to 118.98 (couldn’t get the 119 barriers/stops above) USD/JPY and 149.12 EUR/JPY peaks turned out to excellent intraday sells. Weekly investment Flows and Trade data didn’t give Japanese stocks a needed leg up: they have failed to make new trend highs since Monday, while USD/JPY been ripping off smart new multi year highs each day since then. This bearish divergence was clearly a drag on USD/JPY today, as was the inability to capitalize on bullish US econ data. One could construe the weekly Flow and Trade data as yen bullish, as Japanese were net sellers of foreign assets, leaving foreign buyers of Japanese stocks and bonds (hedged) doing the heavy N225 lifting, and looking a bit exhausted by it this week. On a more basic trading level, quite a bit of good (yen bearish and N225 bullish) news has been priced in since QQE2’s launch, the GPIF reallocation, the confirmed VAT delay and the BOJ’s 8/1 vote at Wed’s meeting. As good as it gets short-term? Longer term, few want to fight a determined BOJ. Daily candle Harami sells in USD/JPY & EUR/JPY are being threatened into today’s close. No JPY data tonight.
Looking Ahead – Economic Data (GMT)
• No Significant Data
Looking Ahead – Events, Other Releases (GMT)
• No Significant events
