Currency Updates:
The Australian Dollar (AUD): Europe ran stops above 0.9315 just before NY walked in. Broad based USD pressure and the basically unchanged RBA statement gave bulls courage to push the pair towards 0.9340 into NY’s open. The USD found little relief from bears for most of NY and AUD/USD rallied to a 0.9367 high. Persistent downward pressure on the US 10-year yield kept the greenback on its heels. AUD/USD saw only a minor pullback and sat just above 0.9360 late in the session. Markets look to Oz Q1 retail sales & China’s April HSBC Services PMI. Oz sales are f/c to improve to 0.4% vs the prior 0.19% while the mkt looks to see if China’s services can hold ground near March’s 51.9 result. Sold results could see AUD/USD’s recent rally push further.
AUD/USD: The close above the 21-DMA & 0.9310/20 resistance zone is encouraging for bulls and they now set their sights on 0.9425/60 resistance where the weekly cloud base & April high reside.
EUR/USD: EZ services PMIs were mostly above f/c with Germany being the noted exception while EZ March retail sales were well above f/c. EUR/USD broke above 1.3900 & ran stops through 1.3910. It sat near 1.3925 as NY got going. Early NY saw broad USD weakness as US yields were soft. Bullish pressure continued and EUR/USD hit a 1.3952 high. Market chatter of Asian reserve offers near 1.3960 and USD/JPY’s inability to make a clean break below 101.50 prevented further gains for EUR/USD. S-T profit taking and EUR/JPY’s break of hourly support near 141.60 aided EUR/USD to dip briefly below 1.3920. A late day bounce saw it settle near 1.3935. Action may be limited overnight as the pair nears the 2014 high and ascending triangle top (1.3965/70). Yellen’s testimony tomorrow and the ECB meeting on Thursday are likely to keep bulls tempered as well. Longs may decide it’s best to unload ahead of this event risk so a slight pullback cannot be ruled out. should the rally persist and the March high break, bulls will try and clear barriers touted at 1.3975 & 1.4000.
USD/JPY: London’s return from its bank holiday brought a swathe of USD/JPY sales, amid broad USD selling. Macro selling into early NorAm trading got it down to the up TL off last June’s lows at 101.49. Equities, outside of EM, struggled as the day wore on, as did long-term Tsy yields. USD-JPY 30-yr yld spreads have fallen by nearly 60bp since the turn of the year, while 2-yr spreads are virtually unchanged. US Q1 GDP revision F/Cs were again lowered by several banks today. USD/JPY’s y/y % change has slid to just +1.1% from +28% a year ago, and could be directly threaten Abenomics trades if allowed by the BOJ to go negative. Bidders, some mooted to be of the semi-official variety, are touted in the low 101.00s to retain the pattern of higher swing lows since the Feb lows. The 200-DMA, last at 101.04, also looks pivotal, with no trading days fully below it since Nov 2012. Offers at 101.85/102. Thursday shows 3bln 101.80-102.00 expiries, over 1bln at 102.50 and 1.3bln between 102.90-103.00. EUR/JPY breached the up TL from Feb lows. BOJ Minutes, Markit Services PMI and Yellen’s JEC are on tap Wed.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ HLFS Unemployment Rate Q1 f/c 5.90%, 6.00%-prev
• 22:45 NZ HLFS Job Growth QQ Q1 f/c 0.60%, 1.10%-prev
• 22:45 NZ HLFS Participation Rate Q1 f/c 68.80%, 68.90%-prev
• 22:45 NZ Labour Cost Index – QQ Q1 f/c 0.50%, 0.60%-prev
• 22:45 NZ Labour Cost Index – YY Q1 f/c 1.80%, 1.70%-prev
• 23:30 AU AIG Construction Index Apr 46.00-prev
• 01:30 AU Retail Sales MM Mar f/c 0.40%, 0.20%-prev
• 01:30 AU Retail Trade Q1 f/c 1.50%, 0.90%-prev
• 01:45 CN HSBC Services PMI Apr 51.90-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
