Currency Updates:
AUD/USD ratcheted lower throughout the NorAm session as Monday’s China PMI fades into the background and the gravitational pull from lower Aussie rates takes over. Bank Bill futures closed at contract highs as the BHP Iron Ore layoff story got traction with the London and NY crowds. The gap created on the Chinese data point on Monday at .9390ish held briefly but better than expected US data (Consumer Confidence and Home Sales) pushed the USD trade higher across the board. Heads up for a potential key reversal in the S&P that could alter the risk landscape short term, and with the All Ords looking toppy the Oz could find itself under renewed pressure if equity markets retreat. Key data point tomorrow and Thursday in the US in the form of Capex and Core PCE. The markets are dying for a trade here and are hoping a good result will break the rate market out of it’s range.
EUR/USD opened NYC 1.3620/25, approx 20 pips up vs last night’s close, O/N range 1.3593/1.3628. Soft German IFO, differences between the UK & EU ahead of the weekend European summit and rising support for an easing in the EZ’s austerity approach weighed on EUR/USD in the NYC session. Algos and ACB offers c 1.3625 capped the topside and left the market seeking flow direction that was not forthcoming. NY traders pressed the downside as London longs scrambled out at their close. Italy’s Renzi wants to adjust the austerity focus and France’s Hollande also seeks a growth promotion focus. EUR/USD NY range 1.3583/27, closed the session -20 pips circa 1.3600.
USD/JPY The USD firmed a bit today on decent new Home Sales and Confidence data, but it wasn’t enough to push USD/JPY out of the recent range between the Kijun at 101.80 and the 100-DMA at 102.22. There was an initial rise on the US data as shorter-term rates climbed, while S&Ps & Nikkei futures also gained, but the curve was flatter right from the start and eventually even short-term rates fell back, as did risk in general. A broken ceasefire in the Ukraine and talk of half-year-end portfolio selling in equities being on tap this week was enough to push USD/JPY off its 102.17 post-data highs and back to the converged 100 & 200-HMAs prices have been homing to lately. The late retreat in risk also pulled yen crosses lower. EUR/JPY’s 138.93 high stopped just shy of the 200-DMA at 139.00. Weak German IFO was shrugged off. Repeated sales into the 200-DMA mean that a break above it would likely squeeze out some of the recently accumulated spec shorts, as seen in the COT data. AUD/JPY, NZD/JPY & GBP/JPY are all showing overbought tendencies, the latter reinforced by the less hawkish Carney et al today. Abe’s 3rd arrow? Old news. Big JPY data day Fri.
Looking Ahead – Economic Data (GMT)
• 23:50 JP Foreign Bond Investment w/e 638.2b-prev
• 23:50 JP Foreign Invest JP Stock w/e 238.1b-prev
Looking Ahead – Events, Other Releases (GMT)
• 03:00 AU RBA Dep Gov Philip Lowe speaks at a conference on “Strengthening the G20’s Accountability and Effectiveness
