Currency Updates:
AUD/USD Early Europe saw AUD/USD smash much of the gains made in Asia. The pair dived from the 0.7840 area and down to 0.7764 before lifting to the 0.7800 area into NY’s open. The USD was soft for most of NY trade and this had AUD/USD firm for most of the session. Short covering and a widening of yield spreads was the original impetus for the pair’s rise. AUD/NZD’s bounce towards 1.0305 added momentum to the pair’s lift. The lift from NY’s open saw very little dips and eventually ran stops above the 0.7860/65 zone. The lift accelerated and a high of 0.7884 was hit. Only a small pullback was seen late in the day and the pair sat near 0.7875 into the close. No big Oz data is due so traders are likely to take cues from China’s March HSBC Mfg PMI. A robust reading should spur more AUD buys. The could see AUD/USD squeeze up to the 0.7914 high of Feb 26. IF that high breaks the door to the 0.8025/55 zone opens wider.
EUR/USD The rally in Europe inspired by the Fed’s Mester’s tip for plenty of room to use easing tools persisted in early NY. The USD was on its heels as US bond yields were on the soft side. EUR/USD sat near 1.0900 into the open and made a run above 1.0945 before any pullback took hold. Draghi hit the wires and weighed a bit. His comment to BBG noting the weak EUR will help inflation return toward 2% sent the pair down to intra-day support in the 1.0885 area. Dip buyers emerged though and the day’s rally resumed as the USD couldn’t mount any serious bounce. EUR/USD eventually hit a 1.0955 high and sat just below it late in the day. A retest of the post-FOMC high looks likely. The 21-DMA has been pierced, the daily RSI is biased up with room to run and yield spreads are narrowing. Should the March 18 high break, traders will begin targeting the 1.1215/45 zone (late-Feb/early-March highs). US Feb CPI data is the big risk tomorrow. A weak reading could see EUR/USD’s recent squeeze accelerate.
USD/JPY USD weakness drew USD/JPY down through Thur & Fri’s lows, but last Wed’s post-FOMC spike low at 119.29 was not retested. Yen short positioning wasn’t nearly as extreme as EUR and others were heading into the FOMC, which is cushioning the blow somewhat for USD/JPY. Fri’s close below the Kijun & 50% Fibo at 120.07 gives the pair a bearish tinge. Weekly Tenkan is at 119.39: key at week’s end if prices are threatening a close below there then. Fed’s Fischer talked about rate hikes sometime later this year, which may have been enough to stabilize USD/JPY in the NY afternoon after last week’s lows couldn’t be retested. With COT data from just before the FOMC meeting showing specs loading up on short EUR/USD and lightening up on long USD/JPY, it’s not surprising that the position adjustment underway is favoring a higher EUR/JPY this week. Today’s low was on the daily Tenkan & high is getting closer to the Kijun at 131.35 and last week’s 131.67 spike high. The 38.2% of the Feb-Mar slide at 130.65 looks like it will finally be closed above, perhaps instigating further buying to the 50% & the weekly Tenkan by 131.80.
Looking Ahead – Economic Data (GMT)
• 01:35 JP Manufacturing PMI Flash Mar 51.6-prev
• 01:45 CN HSBC Mfg PMI Flash Mar f/c 50.6, 50.70-prev
Looking Ahead – Events, Other Releases (GMT)
• 02:00 FRB-SF President John Williams speaks on the econ outlook before a group of Australian economists
• 04:50 RBA Asst Gov Edey participates in a panel discussion at the ASIC Annual Forum 2015
