Currency Updates:
AUD/USD The pair suffered a one-two punch during European and NY trade. Just ahead of NY’s open the Sydney Morning Herald ran a story quoting Bell Potter’s Aitken forecasting AUD/USD to hit 0.6800.The pair dropped from the 0.7770 area towards 0.7715 before bouncing near 0.7735 as NY opened. An early lift saw old support near 0.7750 tested but it turned to resistance and bears took over again. Broad based USD strength then added weight to the pair. As USD/JPY broke above 120.00, AUD/USD slid to a new low of 0.7694. Bids into hourly support near 0.7685/90 halted the slide and the pair sat near 0.7715 late in the day. Traders now turn their focus to the Oz jobs report. A weak print will likely see bears up their game. Yield spreads are then likely to narrow further and pressure AUD/USD to the downside. A retest of the 2015 low likely ensues. A break of 0.7627 then opens the door to 0.7180/0.7240 support.
EUR/USD opened NY 1.1304 -18 pips vs last night’s close, having traded 1.1289/1.1331. NY continued with a similar attitude, traded 1.1280/1.1321 and hands off to Sydney c 1.1302. Event risk from the Greek debt discussions is uppermost on everyone’s minds and no one is adding to risk exposure until we get some firm indications on how they’re going to go down. Positive remarks from the OECD after chatting with Mr Tsipras buoyed sentiment but negative comments from the German camp negated them. The talks are not likely to get far tomorrow as the G20 meeting is focused mainly on E.Ukraine, terrorism/ ISIL, ISIS, Boko Haram et al. We’re probably not going to hear much until next week according to media reports.
USD/JPY Tues’s Cloud top and TL breakout extended Wed beyond some barriers and exporter offers at 120, eventually running into resistance by the down TL from the Dec 23 and Jan 2 high at 120.48 and offers at 120.50. Fed speakers again reinforced the notion that rate hikes are coming this year, but USD/JPY’s rise was buoyed far more by techs & N225 futures than by USD-JPY yield spreads. Those futures have got as high as 18,010 today vs the Dec peak at 18,115. A breakout above the Abenomics high (cash at 18,030) would be bullish for USD/JPY, but raises the question of which mkt is leading. BOJ’s Sato said today that QQE is working, but said mkt concerns about fiscal policy and inflation could undermine their efforts to keep JGB yields depressed. In any event, the Dec 23 high at 120.82 is next beyond the c120.50 offers. If US Retail Sales are decent Thur, it should push this pair much higher. Lacking any clear EZ-Greece conclusion, the working assumption remains that some deal will be reached, which is allowing the O/S rebound in EUR/JPY to remain on track to retrace 38.2% of the Dec-Jan slide at 137.65. Machine Orders from Japan tonight.
Looking Ahead – Economic Data (GMT)
• 23:50 JP Corp Goods Price MM* Jan f/c -0.6%, -0.4%-prev
• 23:50 JP Corp Goods Price YY* Jan f/c 1.1%, 1.9%-prev
• 23:50 JP Machinery Orders MM* Dec f/c 2.4%, 1.3%-prev
• 23:50 JP Machinery Orders YY* Dec f/c 5.9%, -14.6%-prev
• 00:30 AU Employment* Jan f/c 5.0k, 37.4k-prev
• 00:30 AU Full Time Employment* Jan 41.6k-prev
• 00:30 AU Participation Rate* Jan f/c 64.8%, 64.8%-prev
• 00:30 AU Unemployment Rate* Jan f/c 6.2%, 6.1%-prev
Looking Ahead – Events, Other Releases (GMT)
• 22:00 AU – RBA Asst Gov for Fin’l Markets Guy Debelle speaks in Sydney
