Currency Updates:
The Australian Dollar (AUD): AUD/USD The 55-DMA capped Asia’s rally & Europe pushed the pair toward 0.9220 into NY’s open. Bears made a push in early NY as USD/JPY was firm. The 0.9200/15 support was tested again but held as the 0.9214 low was all bears could muster. The USD’s bid faded a bit as US yield slipped and light short covering in AUD/USD ensued. The pair hit 0.9245 and settled near 0.9240 late in the day to leave the pair down nearly 1.3% for the week. Bears hold the advantage for now as the pair set a new low for the recent trend. The 0.9200 is proving to be a tough nut to crack and if further attempts to break it next week fail the risk of a big short squeeze will be extant. Oz April HIA new home sales and Q1 Capex are the main data risks for down under next week. Soft results should weigh on AUD and possibly aid a push below 0.9200. Tech support in the 0.9165/75 area (Dec highs, 200-DMA, channel & daily cloud bases) would then be the next hurdle for bears
EUR/USD The German IFO miss tripped stops below 1.3635/40 and a new trend low of 1.3616 was hit just as NY walked in. NY couldn’t push the pair lower though as bids ahead of the 1.3600 barrier, slightly narrower yield spreads and a market positioned short into the long US weekend made it prudent for shorts to cover a bit. Even headlines from asset manager Blackrock noting reduced peripheral EU bond positions and comments from ECB’s Coeure saying a negative depo rate is an option couldn’t inspire bears. NY lifted EUR/USD off the low and briefly had it touch 1.3643. A lift for USD/JPY above 102.00 pushed EUR/USD down again and it sat just below the 200-DMA late in the session. Bears rule the roost for now as a new trend low is set & the 200-DMA is pierced. The MA break saw only limited follow through and bears may need a more decisive move below it before feeling more confident in pushing the pair lower. Techs still support the slide as day/week RSIs remain biased down with no divergence. Once the slide picks up speed, longer-term bears target the Jan/Feb lows near 1.3475/80 initially.
USD/JPY The rebound begun midweek, after this year’s 101.76 lows couldn’t be broken below, endured on Friday, marginally piercing the export and range-fading spec offers at 102 by the NY afternoon. An early bond mkt close here has sapped the already sleepy Friday afternoon session’s liquidity and interest. A WSJ Kuroda interview left the impression the BOJ Gov is either delusional regarding the yen not being able to rebound further after last year’s plunge or is hoping that PKO and arm-twisting will keep USD/JPY & EUR/JPY supported. If need be, QQE2 could be launched, though this is not favored. More telling might be Kuroda’s thinly veiled warning to the Abe govt that without broad and timely structural reforms (3rd arrows) growth could languish and stagflation could ensue. Techs point to the 102.40-65 area as major resistance and a decent fade unless the MOF flow data show Japanese buying of foreign bonds is accelerating in a structural, rather than seasonal, manner. A tightening of EZ peripheral spreads wasn’t enough to lift EUR/JPY past Thur’s rebound high, due to IFO and Ukraine elections. AUD/JPY made the most of the risk rebound du jour: 94.56 eyed.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ Trade – Imports Apr f/c 4.00b, 4.16b-prev
• 22:45 NZ Trade Balance MM Apr f/c 667.0m, 920.0m-prev
• 22:45 NZ Trade Balance YY Apr f/c 1.30b, 0.80b-prev
• 22:45 NZ Trade – Exports Apr f/c 4.64b, 5.08b-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant events
