Currency Updates:
The Australian Dollar (AUD): The pair was pushed lower in Europe session as it failed to penetrate weekly cloud and sat around 0.9365 as NY got going. The better than f/c U.S CPI initially hit the AUD to 0.9340 before pausing. The USD gains were erased and US yields gave back post gains but AUD did not benefit much from it. AUD tested local bids in the 0.9325/30 area as it hit a low of 0.9327. No further losses were seen though as the USD remained heavy and JPY bulls ran out of gas.
The AUD: Bulls remain in the game as the 21-DMA repels another slide but they may be sweating a bit now. Day/week RSIs roll over and the weekly cloud base continues to cap. If the 0.9400/50 resistance can’t be cleared soon longs may exit and a 0.9200 test may be due.
The EUR: The stronger than expected US data pushed the pair down to 1.3650 but bears only managed a 1.3648 low though as market chatter reported large bids in the 1.3645-48 zone. The USD stayed heavy against JPY though and early US yield gains reversed earlier gains. Shorts intensified their covering on the 1.3680 break. A quick move up pierced the daily cloud base & a high of 1.3732 was hit. Offers into the 100-DMA kept stops above 1.3740 safe. The pair pulled back from the high & sat near 1.3715 late in the day. Daily techs suggest the recent slide may be done. A long legged doji forms while RSI diverges on the new low. A break above the 100-DMA & May 12 high (1.3775) likely sees short cover further and signal a s-t bottom. Trader will focus on US housing data tomorrow for next cues.
USD/JPY A risk-off NorAm session, at first driven by weak EZ GDPs, but then by a plunge in US IP, forced yen-funded trades to be exited as Tsy yields tumbled again and stocks followed suit instead of taking the drop in yields as an excuse to reload risk, as has happened in the past. Sell stops below 101.50 and smaller ones below May 7 swing low at 101.43 were run, but prices found the noted “good” local bids into the 101.32 April lows (101.31 today’s low). Stellar Japanese Q1 GDP may make the BOJ more optimistic about the economy’s ability to handle the April tax hike and less willing to consider QQE2, but exporters and foreign investors are more than happy to fade rallies. The daily Kijun has slipped to 102.22 and some offers are now by 101.70 (Wed’s low and the underside of the up TL fm Jun ’13). One-mo implied vols have been trying to base out with realized, while RR are showing fresh bearish skew today, but all are at extremely subdued levels. EUR/JPY broke Fibo support at 139.13. The 200-DMA at 137.90 is key, having not been breached since Nov ’12. IMM net spec long EUR/USD & USD/JPY positions remain plump at US13.3bln. JPY IP tonight.
Looking Ahead – Economic Data (GMT)
• 02:00 CN FDI (YTD) Apr 5.50%-prev
• 04:30 JP Industrial Output Rev Mar 0.30%-prev
• 04:30 JP Capacity Util Idx Chg MM Mar -2.60%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
