Currency Updates:
AUD/USD The pair lifted in early NY and nearly matched Europe’s 0.8234 high as the USD was broadly offered. The gains were quickly erased though as AUD was sold off in sympathy with CAD after the surprise BoC rate cut. Market sentiment seemed to be that the RBA will have increased pressure to cut on Feb 3. AUD/USD dived and cleared the 21-DMA and January 15 low. Bear pressure increased as the USD rallied against most major currencies due to US bond yields rallying. AUD/USD went on to make a low of 0.8077. Little bounce was seen and the pair sat near 0.8095 late in the day. Bear sentiment is upped now that the pair has taken out some key s-t levels and techs. The Jan 14 low is the next hurdle for bears to overcome before another assault on the 0.8000/30 area is made.
EUR/USD Tight ranges held in Europe’s morning but NY began the session by applying bull pressure on broad USD weakness and speculation that the ECB will disappoint tomorrow. The pair rallied to the 1.1640/50 area before spec and reserve manager offers pushed the pair a bit lower. The gains were erased in no time though as an EZ source was quoted as saying the ECB executive board proposed bond buys of 50bln per month. EUR/USD dived down to the 1.1560/65 support zone but quickly bounced as the headline also stated the proposed buying wouldn’t start until March. Also noted in a BBG headline was that the buys would go through the end of 2016. The pair spiked to a 1.1680 high but those gains eroded as the USD recovered on a rally in US bond yields. EUR/USD then revisited the 1.156 area. The support held again and the pair lifted towards 1.1600 late in the day. All eyes are now on the ECB and what type of QE, if any, is initiated. If the market is disappointed EUR/USD should see a big short squeeze and the 1.1850/00 zone come into play.
USD/JPY The JPY rallied in Asia, while stocks were sold, after BoJ left policy mostly as is (loan programs expanded) and cut its CPI f/c, thus making the FY15 2% CPI goal no longer the central expectation. The CB tweaked its growth f/c up beginning in FY 15/16. The BOJ is trying to look through low oil prices, but they will need better economic growth over the next qtr or two to refrain from pulling the qualitative easing trigger again. The 118.80 high stalled by Tues’s 118.87 high and good offers below the 21-DMA & 61.8% of the 120.82-115.85 slide at 118/92/96, as well as 119 defenses. Weak stocks took USD/JPY to a NorAm low of 117.18, but decent US Single-family Housing Starts & the BOC rate cut lifted quotes. That rally ran out of steam shy of the hourly Cloud top & 61.8% of the 118.87-117.18 slide. EUR/JPY tested the 61.8% of the recent 134.70-137.64 recovery by 135.82 in Asia and in late Ldn. CAD/JPY tumbled on the BOC’s rate cut, with 94.34-36 next L-T supports. Weekly Flow data tonight, but all eyes will be on the ECB meeting Thursday.
Looking Ahead – Economic Data (GMT)
• 00:00 AUD Jan Consumer inflation expectations no f/c prior 3.4%
• : AUD Nov HIA New homes sales no f/c prior 3%
• 01:45 CNY Dec MNI Business Sentiment Indicator no f/c prior 56.2
Looking Ahead – Events, Other Releases (GMT)
• 23:50 JPY Capital flows data w/o Jan 11
• 05:00 JPY BoJ Monthly Economic Survey
