Currency Updates:
AUD/USD A tight range held for the pair in Europe & NY. AUD/USD held close to the day’s lows and was unable to take back much of the post-China RRR cut losses. Bear signs are upped ahead of the RBA. A bearish outside candle formed, price is back below the 10 & 21-DMAs, daily RSI is biased down and yield spreads hold at recent tights. Traders await the RBA and chance of a cut are slightly above 50%. If no cut is made traders expect Stevens to at least initiate an easing bias. Should they cut and take an easy bias AUD bears will charge. The pair should easily take out key support near 0.7720/40 and make a run at the bear channel base and 2015 low.
EUR/USD Europe rallied EUR/USD near 1.1250 into NY’s open. Upon NY’s open another try higher was made but the pair could only reach 1.1241. Solid offers near old support now turned resistance in the 1.1260/70 area from corp & RM names with other offers lined up to 1.1300 loomed and prevented further gains. A broad based USD rally took hold even after a series of softer than expected US data points hit the wires. That USD rally drowned out conflicting headlines regarding a third Greek bailout. EUR/USD slid towards hourly support in the 1.1270/75 zone. A small giveback for USD gains in the afternoon had EUR/USD just below 1.1295 into the end of day. A light data calendar for the EZ & Europe on Tues. might see quiet markets and give the pair more time to digest last week’s losses. Traders likely don’t want to push to far ahead of the ECB and US jobs report later in the week. The outlook does remain bearish though as long upper wicks have formed on recent daily candles and February’s candle as well. Bearish RSIs and yield spreads holding near recent wides bolster a bear view. A retest of the 2015 low looks likely.
USD/JPY Judging by the price action today, the market was simply itching to buy USD/JPY unless US data were horrendous. After the release of below-f/c ISM and much-weaker-than-expected Construction Spending at 10ET, USD/JPY rallied from 119.68 to beyond reported barriers and exporter offers at 120 for a 120.16 high thus far. Tsy yields climbed at the same time, providing the incentive for the USD’s rise. Some of the Tsy yield rise may have been rate-locking ahead of massive corporate issuance. Also heard HFs were doing some new-month switching from fixed-income ETFs to equities. US Core PCE was steady and the rest of the related data close enough to f/c to keep money markets looking for a 25bp rate hike by Sep. Unless that baseline assumption is degraded by far worse-than-f/c US data, starting with this Friday’s jobs report, the USD will be bought vs ccys with CBs doing QE and/or with lower interest rates. USD/JPY is approaching the dn TL off the Dec 23 high, Tues at 120.35, and offers into 120.50 and nearby Feb high. EUR/JPY is trying to build a base above the Kijun, 50% Fibo & Thur & Fri’s lows at 133.43-45. JPY Jan Labor Earning are out tonight.
Looking Ahead – Economic Data (GMT)
• 00:30 AU Building Approvals* Jan f/c -1.8%, -3.30%-prev
• 00:30 AU Private House Approvals* Jan 0.00%-prev
• 00:30 AU Current Account Deficit* Q4 f/c 11.00b, 12.50b-prev
• 00:30 AU Net Exports Contribution* Q4 f/c 0.6%, 0.80%-prev
Looking Ahead – Events, Other Releases (GMT)
• 03:30 AU RBA Cash Rate* Mar f/c 2%, 2.25%-prev
