Currency Updates:
AUD/USD The pair gave back the post-Lowe comments gains but held above the post-Oz GDP low in Europe as AUD/NZD’s rally negated USD strength. The pair sat near 0.7810 as NY got going. The USD’s rally turned out to be too powerful to ignore in NY. The broad based rally saw AUD/USD finally give in and stops through 0.7790/95 were run. There was no looking back for the pair and the slide approached key support near 0.7740/50. Little bounce was seen and the pair lingered near the day’s low late in the session. The pair may get some impact from the AiG Feb PCI but it’s likely to be limited as the market awaits the US jobs data. A solid jobs report should see 0.7740 break and stops run. Bears then set their sights on the bear flag base followed by the 2015 low.
EUR/USD A tight range held in Europe’s morning as the market awaited Draghi’s presser which detailed the QE program and the ECB’s economic projections. The projections got the most impact initially as algos took control as the headlines scrolled past. The ECB upped their GDP f/c for 2015 & 2016 vs. the December f/c. This spike EUR/USD up to a 1.1115 high. Draghi then went on to say that inflation over the coming months will be very low or negative. EUR/USD began sliding from the high. Draghi’s note to the projections being conditional on policy implementation and a tip to there being some complexities in the bond buying program didn’t inspire confidence in the EUR. EUR/USD dived hard, erased all the spike high gains, cleared the 1.1000 barrier and hit a new trend low of 1.0988. Intra-day profit and an abating of the USD’s broad based rally saw the pair bounce and sit near 1.1025 late in the day. The US jobs report is the next big risk. An upward beat to forecasts should see EUR/USD dive further. L-T bears target the Sep ’03 low (1.0760).
USD/JPY spiked up to its 120.40 session high after the 8:30ET US data releases and the start of Draghi’s press conference. It was a counterintuitive move in that US Claims were well above f/c and USD-JPY 2-yr yield spreads began to fall. Exporter and macro offers at 119.40-50 were reinforced by the upper 21-d Bolli and the Feb highs nearby.Longs got shaken out to 119.94, just above Asia’s high and close to the USD3bln of 120 expiries at the 10ET cut. After that cut prices improved a bit from 120.00 to 120.27, in line with a bounce in Tsy yields and broad-based USD buying. A higher-than-expected 4.1% rise in Q4 US Unit Labor Costs may have given Fed hawks and USD bulls a little something to lean on amid today’s mediocre data, which included another drop in Factory Orders. More broadly, MOF flows show GPIF et al remain highly acquisitive of foreign stocks and bonds. A breakout and close above 120.50 is the main topside objective. The way the USD’s been trading of late, anything close to f/c in Fri’s NFP should be enough to push it higher as the ECB goes QE & after 43 rate cuts have been made by other CBs this yr. EUR/JPY teeters on Feb’s 132 low.
Looking Ahead – Economic Data (GMT)
• 22:30 AU AIG Construction Index Feb 46.00-prev
• 23:50 JP Foreign Reserves Feb 1261.10b-prev
• 05:00 JP Coincident Indicator MM* Jan 1.50-prev
• 05:00 JP Leading Indicator* Jan 1.50-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
