Currency Updates:
AUD/USD A tight range held for AUD/USD in Europe & NY trading. The pair consolidated recent losses as it held to a 0.7730/0.7798 range. The pair was unable to break out as it was buffeted by a falling AUD/JPY & EUR/AUD and rising AUD/NZD. Some doubts over the RBA cutting on Feb 3 also kept traders a bit reticent to move the pair. The Australian ran a piece quoting RBA watcher McCrann seemingly backpedaling on his early week call for the RBA to cut. This added to the pair’s indecision and inability to make headway in either direction. Late in the day the pair sat closer to the upper end of the range as commodities and risk bounced. The pair may stay in limbo until Stevens make his decision. Should rates remain unchanged AUD/USD likely sees a knee-jerk reaction higher. However, if rates are unch and the tone of the statement is dovish the market likely interprets that as rate cuts are coming. AUD/USD should see a new leg lower and test the July 2009 low at 0.7700.
EUR/USD Europe rallied the pair towards the Jan 29 high and 10-DMA but failed to breach either. JPY strength weighed on EUR/JPY which aided to cap EUR/USD’s lift. The pair slid a bit and sat near 1.1345 into NY’s open. Bear pressure remained on the pair and even a below f/c US GDP print gave little relief. The pair’s slide extended to 1.1278 as EUR/JPY neared 132.35. An afternoon lift for the USD helped keep the pair near the day’s low and it sat just below 1.1300 late in the day. There is little in the way of major EZ data to drive the pair next week so the USD side of the data equation will get the most impact. January ISM mfg and non-mfg as well as the Jan US jobs report will get the markets attention. Should the reports come in weak EUR/USD may see a squeeze. Stops above the Jan 27 high then may be run. If the squeeze persists it’s possible a run to the 21-DMA and 1.1650/80 zone could ensue as the market still holds large short positions. Solid US data reports likely see the l-t bear trend go further and the pair make a run at the psychological 1.1000 level..
USD/JPY For the sixth time since the Jan 20 breakdown session, USD/JPY ran into bidders, or out of sellers, in the low 117.00s, with today’s 117.30 low the byproduct of a weak US GDP report, but helped along by derisking related to Greece and in the wake of yesterday’s Reuters story suggesting the BOJ and some advising the Abe govt are wary about further QQE efforts to weaken the yen. Falling Tsy yields and stocks (N225 futures, too) were not enough to break the recent USD/JPY stalemate, but the daily and weekly charts both have bearish casts. And while Meiji Yasuda Life announced a tripling of its “new areas” investment over the next 3.5 yrs, Japan pension and other investment flows abroad are likely to be tepid in the final qtr of the FY, particularly as govt yields in the US and other majors tumble. A nasty short-squeeze in oil prices after the Baker Hughes rig count fell was a slight negative for the yen toward day’s end, as falling imported energy prices have lowered Japan’s trade deficit and helped offset the yen’s fall that inflated import prices generally. EUR/JPY struggled amid dour Greek HLs & is probing the last two days lows into the close.
Looking Ahead – Economic Data (GMT)
• 01:00 CN NBS Manufacturing PMI* Jan f/c 50.2, 50.1-prev
• 22:30 AU AIG Manufacturing Index Jan 46.9-prev
• 23:30 AU TD-MI Inflation Gauge Jan 0%-prev
• 01:35 JP Manufacturing PMI Jan 52.1-prev
• 01:45 CN HSBC Mfg PMI Final Jan 49.8-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
