Currency Updates:
AUD/USD The pair defied narrowing yield spreads in Europe and the pair’s post-CAPEX bounce set a new s-t trend high. The pair hit a high of 0.7914 which the bear flag top. The pair began sliding as the USD put in a solid rally. NY walked in with the pair near 0.7890. The USD’s lift got a boost after durable goods results were solid. US bond yields lifted and took the USD with them. AUD/USD’s slide intensified and ran s-t stops through 0.7835/40. The drop persisted through NY’s session and late in the day the pair was threatening to close below the 21-DMA. Bear signals are upped after daily RSI diverged on the new s-t high and a bearish engulfing candle formed. A test of key support near 0.7720/40 looks likely. A break there puts the 2015 low in play. Another round of solid data from the US tomorrow might see that support cleared.
EUR/USD A lackluster session in Europe’s morning met some stunning action in NY. The pair sat near 1.1355 into NY’s open after touching a 1.1380 high in Europe. The USD rallied early on as the Fed’s Bullard noted on CNBC the FOMC should remove ‘patient’ from its March policy statement and clear the way for a rate hike. The USD got a further boost off the solid durable goods result as US bond yields soared. EUR/USD dived down and hardly looked back until it reached its 1.1184 low. Overly zealous USD bears covering recent shorts combined with steady selling from medium and short term names to drive EUR/USD lower. A slight slip late in the day for the USD saw EUR/USD lift towards 1.1200 ahead of NY’s close. Traders now look to German Feb CPI readings and US Q4 GDP report for their cues. Should US GDP come in above forecasts EUR/USD is likely to get hit again as the market will believe the chances of a Fed hike are upped. The 2015 EUR/USD low then comes into play.
USD/JPY Rising Tsy yields served the USD well against the JPY and most ccys Thur, after Real Weekly Earnings were reported up 1.2% m/m vs a 0.3% rise f/c; news that eclipsed the mixed overall and core CPI results & Claims rise. USD/JPY was already ready for a rebound after being unable to retest Wed’s lows before the NY open. Yet another week of Japan buying of foreign stocks and bonds reported o/n and another strong Japanese stock market rally had already reduced the risk longs taken above the 21-DMA and Kijun would be stopped out. With large US retailers in somewhat of a bidding war for labor and the US jobless rate already near historically low levels, the mkt is slowly assuming that even the Yellen-led Fed will need to raise rates later this year. The BOJ is clearly on hold for now, but once last April’s VAT hike drops out and the BOJ’s 2% CPI target begins to look even less likely by ’15-16 FYE, the BOJ might be forced into a QQE3 around the time the Fed begins to raise rates. Offers at 119.50 slowing gains for now, but better supply is by 120 and then the dn TL off the late Dec, early Jan and Feb highs, Fri at 120.37. Huge JPY data slate Friday.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ Building Consents Jan -2.1%-prev
• 23:30 JP All Hhold Spding YY* Jan f/c -4.1%, -3.4%-prev
• 23:30 JP All Hhold Spending MM* Jan f/c 0.4%, 0.4%-prev
• 23:30 JP CPI, Core Nationwide YY Jan f/c 2.3%, 2.5%-prev
• 23:30 JP CPI, Overall Nationwide* Jan 2.4%-prev
• 23:30 JP CPI Core Tokyo YY* Feb f/c 2.2%, 2.2%-prev
• 23:30 JP CPI, Overall Tokyo* Feb 2.3%-prev
• 23:30 JP Jobs/Applicants Ratio Jan f/c 1.15, 1.15-prev
• 23:30 JP Unemployment Rate Jan f/c 3.4%, 3.4%-prev
• 23:50 JP Industrial output prelim mm Jan f/c 2.7%, 0.8%-prev
• 23:50 JP IP Forecast 1 Mth Ahead* Jan 6.3%-prev
• 23:50 JP IP Forecast 2 Mth Ahead* Jan -1.8%-prev
• 23:50 JP Retail Sales YY Jan f/c -1.3%, 0.2%-prev
• 00:00 NZ NBNZ Business Outlook Jan 30.4%-prev
• 00:00 NZ NBNZ Own Activity Jan 37.3%-prev
• 00:30 AU Private Sector Credit* Jan f/c 0.5%, 0.5%-prev
• 00:30 AU Housing Credit* Jan 0.6%-prev
• 05:00 JP Construction Orders YY Jan 7.5%-prev
• 05:00 JP Housing Starts YY Jan f/c -11.3%, -14.7%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
