Currency Updates:
AUD/USD Oz held on to tentative gains as bulls and contrarians try their luck on the long side after yesterday’s key reversal (higher) in Australian short rates and Retail Sales beat. AUD managed to settle midrange but up on the day despite a broad USD advance led by weakness in EUR. AUDUSD needs to quickly recapture the 200 hma at .7650-60ish or risks killing any upside momentum the pair might have had. Bulls aren’t risking much, most have stops under today’s low at.7578.
EUR/USD The EUR reverted to being the favored short amid the USD’s stunning recovery from Fri’s big downside NFPs miss, in part as European stocks were again bought up, some indices to new highs, with a goodly portion of that demand coming from overseas and having the EUR risk hedged off. Prices have fallen below the daily Tenkan & 61.8% of the Mar 31 to Apr 6 rise at 1.0836 and are close to the up TL off the Mar-Apr lows at 1.0805 (Wed up at 1.0827). The post NFP rally’s failure to take out the March highs has kept traders eager to fade rally, despite the enormous net spec IMM short positioning. ECB’s Mersch today noted QE could be adjusted if need be, but Draghi has made it clear he will not let off the gas pedal until all his goals have been met. Slight improvement in EUR Services PMIs and Feb PPI were shrugged off, so, too, were dovish comments from Fed’s Kocherlakota and former Fed Chair Bernanke. A rise in US JOLTS Job Openings was mildly USD positive. Greek demand for massive war reparations from Germany is dimming the mkt’s view of the new govt & its ability to reach a new debt deal with the troika.
USD/JPY The ability of US markets to shrug off Fri’s poor jobs report and retain the expectation that the Fed will get around to a rate hike or two this year is driving USD/JPY beyond the Mar 31 swing high at 120.37, as well as the 21-DMA and the daily Kijun. The latter two haven’t been closed above since Mar 19. The Mar and Apr pullback lows both found support from the daily Cloud. Even with only a modest bounce in USD-JPY 2-yr yield spreads this week, USD/JPY now looks headed for a run at the 122.04 Abenomics peak from Mar 10. The BOJ meeting concludes tonight, with few expecting the current QQE2 to be adjusted, but the sprint to new highs in the Nikkei suggests some fear, or hope, more easing is coming. Japan’s Feb Trade balance is also due out tonight. 120.50 is the nearby pivot pt, with offers into there and stops above. While EUR/JPY remains heavy, AUD/JPY and GBP/JPY are exhibiting bottoming signs amid broad rerisking flows. USD/JPY 1-mo implied vol is trying to bounce from lows ahead of the BOJ’s Halloween QQE2 surprise.
Looking Ahead – Economic Data (GMT)
• 23:50 JP Current Account NSA JPY* Feb f/c 1150.0b, 61.4b-prev
• 05:00 JP Economy Watchers Poll* Mar 50.1-prev
Looking Ahead – Events, Other Releases (GMT)
• : JP BOJ Monetary policy statement
• 03:00 JP BOJ’s Kuroda press conference
