Currency Updates:
AUD/USD The pair gave up all the gains made post-RBA. Europe shrugged off the statements as well as JPY weakness to instead focus on broad base USD strength. AUD/USD slid from above 0.8520 and sat near 0.8460 as NY got going. NY applied pressure early as the USD stayed firm on rising US bond yields. A low of 0.8432 was hit and then a bounce took hold after the latest Fonterra mil auction was weak. NZD’s spike lower sent AUD/NZD rocketing up to the 1.0845 area. AUD/USD lifted towards 0.8465 but no further gains were possible as the USD held most of the day’s gains. Late in the day AUD/USD sat just below 0.8445. Traders now turn their focus to Oz Q3 GDP and China services PMIs. Should the data results come in soft, AUD/USD is likely to test 0.8400. If it breaks we’re likely to see a quick trip to the 0.8315 low from July 2010.
EUR/USD Early Europe saw the pair hugging the 200-HMA. Bears emerged though as the USD went broadly bid on rising US bond yields. The pair slipped from near 1.2465 and sat just below 1.2440 into NY’s open. NY wasted no time in applying bear pressure. US yields added to gains and USD/JPY broke above 119.15 to have the USD bid across the board. EUR/USD slid lower with virtually no bounces as US-German yield spreads went further in the USD’s favor. The pair traded down to the 1.2375/80 area and saw little bounce as it held near there late in the day. Traders eye the 1.2350 barrier after the pair failed to hold above the 10 & 21-DMAs. The barrier may get a test if services PMI data from the EZ and China are soft. Should the barrier break another leg lower for EUR/USD is likely as the break means the recent consolidation phase is done. A test of weekly lows in the 1.2240/95 is then likely to ensue.
USD/JPY The day was pretty much over for the USD/JPY after the first two hours of NY trading extended o/n gains to 119.28 (7-yr high) on the back of rising N225 futures and Tsy yields. The USD was generally bought as the slide in commodities resumed after Monday’s dead cat bounce in energy. Reuters reported on very bearish comments by the former Saudi intelligence chief re the market share war now underway in oil. The plunge in oil prices is a relief for Japan’s inflated import’s bill, but real wages were down 2.8% y/y in Oct as cash earnings slipped to just 0.5%. Japan’s main labor union is said by Kyodo to be readying a 2% pay rise request for 2015; that as the Abe govt twists Japan Inc’s arms for wage increases to restart the hoped for virtuous cycle of higher wages, higher spending and higher prices. On the day, decent offers at 119.25-35 flattened out USD/JPY’s early advance, but demand is relentless and evident in the ever shallower pullbacks on intraday charts. All eyes are on 120 heading into the NFP report Friday, particularly after the solid ISM report Monday. EUR weakness dragged EUR/JPY away from nearing the Nov 21 high & daily pivot pt at 148.43.
Looking Ahead – Economic Data (GMT)
• 22:30 AU AIG Services Index Nov 43.6-prev
• 00:30 AU GDP QQ Q3 f/c 0.7 %, 0.5 %-prev
• 00:30 AU GDP YY* Q3 f/c 3.1 %, 3.1 %-prev
• 00:30 AU GDP Final Consumption* Q3 0.5 %-prev
• 00:30 AU GDP Capital Expenditure* Q3 0.3 %-prev
• 00:30 AU GDP Chain Price Index* Q3 -0.5 %-prev
• 01:00 CN NBS Non-Mfg PMI* Nov 53.8-prev
• 01:45 CN HSBC Services PMI Nov 52.9-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
