Currency Updates:
AUD/USD A quiet European morning was abruptly stirred to life in early NY. Soft US bond yields had the market leaning more in favor of unwinding USD longs since the Fed’s action from Wednesday. AUD/USD sat near 0.7690 as NY got going. The USD sell-off saw AUD/USD spike higher once s-t stops above 0.7710 were run. The rally persisted for most of NY with very little pullback seen. the lift stalled just short of hourly resistance from March 19 as it hit a high of 0.7802. Intra-day profit taking for USD bears then saw the pair slip back near 0.7775 late in the day. There is no major OZ data next week so traders will look to the USD side of the equation for cues. US Feb CPI is Tuesday. A below f/c reading could see the recent AUD/USD rally press on. As it stands now bulls are gaining some traction. The pair is solidly above the 10 & 21-DMAs, daily RSI is biased up while the monthly is near diverging and a long lower wick is in place on the monthly candle. A retest of the post-FOMC high looks likely for now. A break of the 0.7900/30 zone might lead to a bigger squeeze and a test of 0.8025/55 resistance might ensue.
EUR/USD Early NY echoed Europe’s quiet morning but the stillness didn’t last very long. NY walked in with EUR/USD just below 1.0700. A sharp drop in USD/JPY and US bond yields initiated a round of broad based USD sales. EUR/USD lifted from the open and ran stops through 1.0740. the rise persisted and got a boost as a large US bank recommended cutting USD long positions vs. EUR , CAD & AUD. Somewhat dovish comments from the Fed’s Lockhart & Evans added to the USD’s woes. EUR/USD’s lift pressed on and hit a 1.0882 high. A late day rebound for the USD saw some intra-day profit taking kick in and EUR/USD sat near 1.0815 late in the day. EZ data next week is second tier so traders look to the US for direction. US Feb CPI kicks things off on Tuesday with Fed Durable Goods following on Wednesday and Q4 GDP then due on Friday. Should the data set indicate a weakening US economy, the USD long trade get put further in doubt and more covering likely ensues. EUR/USD’s squeeze might press on and the post-Fed reaction high might break. Should that occur, the pair has scope to the 1.1150/1.12550 resistance zone.
USD/JPY Not at the weekly close yet, but USD/JPY is comfortably below the daily Tenkan at 120.67 and has been below the Kijun & 50% of the 119.29-122.04 rise at 120.075 intraday. A close below the latter would raise suspicions about a possible retest of the daily Cloud that is going to twist on March 25 at 118.28/50. A steady stream of new trend highs in the Nikkei are being overlooked due to bearishly diverging USD-JPY 2-yr yield spreads since March 6, and, more broadly, since late Dec trend highs. Weekly oscillators are also flashing bearish divergence signals since the 122.04 trend high barely bested the Jan 8 peak at 121.86. The Dec 5 closing high at 121.53 has yet to be closed above. The BOJ’s QQE2 & Abenomics have had some success in lifting this year’s annual wage agreements vs last year and the govt, at the Feb BOJ meeting, removed its request that the BOJ get CPI to the 2% target ASAP. Fed fund futures have reduced the probability of a June rate hike. Now the focus will be on March US data to see if it improves dramatically from weather-beaten Jan & Feb results. Yen lost ground on the cross due to widespread USD hi-beta losses.
Looking Ahead – Economic Data (GMT)
• 21:00 NZ Westpac Consumer Survey Q1 114.8-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
