Currency Updates:
AUD/USD initially was a major beneficiary of the PBOC’s actions as it got a major boost off rallies in commodities. NY walked in with AUD/USD near 0.8700. NY made an attempt to clear Europe’s 0.8723 high as the USD was soft and commodities remains firm. The attempt failed and the pair slipped as doubts about the efficacy of the PBOC action crept into the market. The pair hit 0.8700 again as JPY strength drove AUD/JPY from the 102.75 area down below 102.30. AUD/USD tested the 200-HMA and hourly support in the 0.8685/90 area. The pause there was brief though as the USD rebounded from earlier losses vs JPY. AUD/USD slipped further to trade near 0.8665. Little bounce was seen and the pair sat near 0.8670 late in the day. The pair’s inability to mount bigger gains off the PBOC as well as it’s failure to hold above the 10 & 21-DMAs may concern recent longs. Bears appear to be putting up a fight. Aussie Q3 Capex report is due next week. A weak result likely puts added bear pressure on AUD. We might then see a retest of the 0.8540/60 support zone.
EUR/USD was broadly crushed in Europe’s morning after ECB Chief Draghi showed deepening concern over price stability. EUR/USD dived from 1.2553 to 1.2415 before bouncing ever so slightly into NY’s open. Early NY saw a lift to hourly resistance near 1.2440 but bears were waiting and the pair slid again before pausing briefly ahead of 1.2400. The drop resumed as EUR/JPY added to overnight losses once the pair broke cleanly below 146.30. EUR/USD took out 1.2395/00 support and ran stops. A low of 1.2375 was then hit. A bit of late day profit taking from USD longs allowed the pair a bounce towards 1.2390 and the pair sat there towards the close. The pair couldn’t hold above the 10 & 21-DMAs and a bearish engulfing candle formed on the weekly charts. This suggests the long-term bear trend is close to resuming. A break below 1.2350/60 will confirm that view. Bears then target the mid to late Aug 2012 lows near 1.2240/95 initially. A break there puts the 2012 low at 1.2042 in play.The US has a large line up of data risks next week. If results are upbeat EUR/USD should trade heavy again.
USD/JPY bulls survived the Aso comments (about a too-quick yen depreciation) with minimal damage as the Wednesday post-FOMC lows at 117.35-40 held a couple of attempts to break it lower. All the action was in EURJPY, which goes into the weekend with a tenuous grip on the 200 hma. Stocks rallied hard, including the Nikkei, after the PBOC rate cut but save for AUDJPY the major yen pairs didn’t follow suit. The short yen trade feels tired and we wouldn’t be at all surprised to see some position squaring in to a holiday-shortened week. Through USDJPY 117.30 and/or EURJPY 145.75 will generate some follow through selling.
Looking Ahead – Economic Data (GMT)
• No Significant Data
Looking Ahead – Events, Other Releases (GMT)
• No Significant events
