Currency Updates:
AUD/USD Europe ignored the soft NAB data and instead focused on USD weakness. They rallied AUD/USD from the 0.8232 area towards 0.8285 as NY got going. NY applied bull pressure as US bond yields saw a nice slip to drive USD/JPY off a cliff. AUD/USD lifted right out of the gate in NY, ran stops above the 0.8310/25 resistance area and hit a 0.8371 high. The USD and US bond yields staged a comeback after Europe’s close though. This saw AUD/USD give back most of NY’s gains as the pair sat just below 0.8310 late in the day. Traders will now focus on Westpac Dec consumer confidence and China CPI data for Nov. Soft results should remind traders that the global econ is shaky and see risk turn heavy. AUD/USD might then give up more of today’s gains and take another look at the new trend low before the Oz jobs data hits.
EUR/USD Broad based USD weakness in Europe’s morning saw EUR/USD’s short squeeze from Dec 8 persist a bit further. The rally, seemingly driven more by positioning than anything else, lift from below 1.2320 towards 1.2355 into NY’s open. Shorts pushed the pair again in early NY. US yields began a serious slide and this put massive pressure on USD/JPY which inspired USD longs to cover across the board. EUR/USD paused briefly by the 200-HMA but the resistance broke and stops above 1.295 were run. The squeeze accelerated at that point and the pair quickly hit a 1.2448 high. Offers near the 21-DMA and TL off October’s high stalled the rise. A rebound for US bond yields, stock and the USD then saw the pair slip for its high. Late in the day the pair slipped back towards the 200-HMA and sat just below 1.2380. Trades will keep a keen eye on China’s CPI data tonight. A soft number is likely to have a knock-on effect with EUR as the EZ’s inflation outlook softens. A soft CPI tonight might see risk hit and much of EUR/USD’s gains from today eroded.
USD/JPY This week’s retreat from near the ’07 highs in the N225 and USD/JPY today flushed out recent buyers of both, sending 1-mo vols surging to their highest since Sep ’13 and above 12. Riskies swung back to a put bias for the first time since mid-Nov after reaching the highest call bias since May ’13 last Thur. Sell stops were run below 119.15 (200-HMA, daily Tenkan & recent 50% Fibo) 119.32 (up TL off the Nov 10 7 27 lows) 119, 118.50 & 118. The 117.90 low was close to the 21-DMA and the weekly on-close pivot point at 117.86, the Nov 1 low. The worst of it was over by the Ldn close and prices then rebounded to between the 119.32 TL and the 119.55 Tenkan. A daily close below the latter would be the first since clearing it on Oct 20 at 106.97. That the recent uptrend was so deeply penetrated and O/B daily and weekly studies have rolled over from o/b readings suggests there could be more risk-off unwinding of longs here and in the crosses. But with 23.5b of 120 expiries ahead of yr-end, consolidation may suffice. GBP/JPY’s collapse ended by the Kijun, EUR/JPY’s by the 21-DMA: AUD/JPY is below both. New JGB yld lows despite the Fitch warning.
Looking Ahead – Economic Data (GMT)
• 00:30 AU Consumer Sentiment Dec 1.9%-prev
• 00:30 AU Housing Finance Oct f/c 0%, -0.7%-prev
• 00:30 AU Invest Housing Finance* Oct 3.7%-prev
• 23:50 JP Business Survey Index* Q4 12.7-prev
• 05:00 JP Consumer Confid. Index* Nov 38.9-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
