Currency Updates:
AUD/USD Spec offers ahead of the daily cloud top and talk of Asian offers in the 0.9300 area stymied the post-China inspires AUD/USD rally. Bears in Europe jumped on the chance to sell and lowered the pair from 0.9274 towards 0.9240 into NY’s open. Early NY action was mixed but a slight bounce took hold after above f/c jobless claim and below f/c US housing data. With the lift being very limited bears took hold again as the USD was firm on rising US yields. AUD/USD slid below the pre-PMI levels & hit a low of 0.9214. No further losses were made though as exporter bids and barrier protection ahead of 0.9200 was too much for bears to contend with. The pair sat just above the low late in the session. With nearly all of the May 21 bounce erased it looks like a break of 0.9200 is only a matter of time. Good stops are reported below that level and if run 0.9170/75 support (200-DMA, channel base, daily cloud base) is the first support to overcome. Beyond that there is little support until the 0.9050 area.
EUR/USD Shorts were squeezed after the mixed EZ PMI results. EUR/USD popped from near 1.3650 towards Asia’s 1.3688 high. No further gains were possible though and the pair lingered just above 1.3680 as NY got going. Weak US data in the form of housing and jobless claims couldn’t inspire a lift for the pair and a steady drift lower took hold for the NY session. A low of 1.3645 was eventually hit as US yields continued their recent bounce. Aiding the slide is the fact that EUR/USD is getting more comfortable near recent lows and no short squeeze seems forthcoming. Other factors to help the pair lower today was ECB’s Wiedmann stating that reviving the ABS mkt isn’t a task for a central bank as well as an ECB source stating it will be recommended that Dexia can avoid the EU’s bank stress test. A small bounce saw the pair just above 1.3650 late in the day but lower levels look to be coming. Much of the May 21 bounce off the 200-DMA has been erased, day/week RSIs remain biased down and yield spreads edge further in the USD’s favor. A break & close below the 200-DMA opens the door to 1.3475/80 support.
USD/JPY The downtrend from the May 2 peak was breached by today’s USD/JPY advance, as the blowback from yesterday’s failed attempt to remove this year’s lows by 100.76 continued. The yen is correcting a generally overbought condition on the dailies, while overbought US Tsys come in for a correction that’s lifted yields a bit in support of the dollar. The low-hanging short-covering fruit is now harvested and prices are approaching their first real supply in the 101.90-102 range from exporters and mean reversion traders (21-DMA, daily Kijun & recently broken M-T up TL there). With net spec yen shorts still hefty at 64k last week, even an interim positioning dip is likely to leave longer-term, struggling, USD/JPY longs looking for rallies to fade. MOF flows showing Japanese net buyers of Y1.4trln of foreign bonds is burnishing the yield-search story, but the Kampo move was too small to matter for more than a day, while GPIF et al reallocation is a well-known story. In any event, we doubt USD/JPY will get past the mid 102.00s. US data du jour were uninspiring. EUR/JPY is also getting an oversold bounce as June ECB rate cuts are well anticipated by now.
Looking Ahead – Economic Data (GMT)
• 03:00 CN CB Leading Economic Index Apr 1.2-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
