Currency Updates:
AUD/USD The doji formed on Wednesday saw upside follow through today as Europe pushed AUD/USD just above 0.7680 into NY’s open due to broad based USD weakness. NY kept the pair bid early on and then spiked the pair up on the disappointing retail sales data. The rally touched the 10-DMA and hit a high of 0.7731. No further gains were possible though. Offers into the 0.7740/50 region loomed and the market didn’t want to push it’s luck. The USD began clawing back losses as US bond yields firmed a bit. AUD/USD slid from the high in NY’s afternoon as the USD lifted and commodities turned heavy. The pair tested intra-day support near 0.7680 and sat nearby late in the day. There is no major data due in Asia’s session so positioning might be the drive heading into the weekend. The market remains short AUD and traders may now be thinking the Fed won’t be lifting rates anytime soon as data has disappointed. The current short squeeze might persist until the Fed results are released March 18.
EUR/USD Short covering in Europe had the pair test near 1.0650 before pulling back below 1.0600 into NY’s open. NY bid the pair up early as shorts bought the dip. The lift got an added boost after US retail sales missed big and prior sales data results saw downward revisions. US bond yields fell and the USD saw a broad based spike down. EUR/USD quickly hit a 1.0684 high but the gains didn’t last long. Solid offering interest in the 1.0685/00 zone and talk of sovereign selling saw the pair quickly slip below pre-retail sales levels. The slide deepened in NY’s afternoon as bond yields clawed back some losses after a disappointing US 30 year bond auction. EUR/USD slipped just below 1.0600 and lingered nearby heading into the close. There is little major data from either the EZ or US tomorrow so action might remain choppy or be driven by positioning. With the market still well short EUR we might see bears get squeezed further into the weekend and ahead of the Fed next Wednesday.
USD/JPY & Tsy yields sank following the huge downside miss in US Retail Sales, but buyers were ready to scoop up that discount to 120.655 (just below the Tenkan & 50 % of the Mar range at 120.71). A big drop in Jobless Claims and some discounting of the RS miss due to poor weather, ltd downside in the dollar, while the softer Tsy yields helped stocks and drove N225 futures to their highest since Apr of ’00. USD-JPY 2-yr spreads remain a bit of a drag on USD/JPY, but perhaps less so given that a portion of the Tsy buying and JGB selling these days is from Japanese pensions reallocating. Japanese stocks are being driven higher partly by BOJ ETF buying, but mostly by record corporate profits from multinationals. Exporter offers remain into 122, with buy stops touted above this week’s 122.04 trend high. The BOJ is unlikely to launch QQE3 in H1, so the existing policy divergence with the Fed will have to suffice for now. The ’07 pre-GFC peak at 124.14 is the marquee M-T hurdle. EUR/JPY’s plunge paused today after the lower 21-mo Bolli by 127.50 was neared. AUD/JPY’s 50% Fibo base Wed got help from AUD & CNY econ data. JPY IP/CU are out Fri.
Looking Ahead – Economic Data (GMT)
• 11:00 NZ Manufacturing PMI* Feb 50.9-prev
• 02:00 NZ RBNZ Offshore Holdings* Feb 63.6%-prev
• 04:30 JP Industrial Output Rev* Jan 4%-prev
• 04:30 JP Capacity Util Idx Chg MM* Jan 2%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Eventsa
