Currency Updates:
AUD/USD Europe didn’t allow AUD/USD longs to come up for air after the miserable OZ trade data. What little lifts of Asia’s 0.9450 low were capped near 0.9465. NY walked in with the pair just below that level ahead of ADP. The big beat for ADP sent US yield higher. AU-US yield spreads widened and the USD went bid across the board. AUD/USD dived, ran stops through 0.9440/45 and hit a 0.9429 low. Pressure remained on the pair as AUD/NZD traded down to 1.0765 and GBP/AUD buying went through the market. Late in the day the pair sat near 0.9440. Recent longs are getting anxious as it looks like the 0.9500 break on July 1 may have been false. They will focus on RBA Chief Stevens’ speech in Hobart later, the ECB meeting and the US jobs report for their cues. Should the stars align and AUD get weighed upon, AUD/USD may see a quick move to key support in the 0.9320 area.
EUR/USD An early European lift for the pair couldn’t break s-t resistance near 1.3685 and the pair drifted lower. The big beat on UK’s June PMI sent GBP higher and EUR/GBP plummeting through 0.7970/75 support. it eventually hit a low of 0.7950 (D3). EUR/USD was pressured off that drop and slipped from the highs towards 1.3655 before lifting near 1.3670 into NY’s open. Bulls ran into further trouble after the ADP jobs came in well above estimates. US yield and the USD put in solid gains. EUR/USD dumped down to a 1.3641 low before intra-day short covering ahead of Yellen took it back to 1.3660. Action settled after Yellen’s remarks saw little reaction from the markets. EUR/USD dipped back near 1.3655 and sat there late in the day. Markets now await the ECB and US jobs data. The ECB is f/c to keep rates unch so focus will be on Draghi’s presser. Traders will look for tips to future policy and info on the TLTRO. Draghi is most likely to strike a dovish tone. While Draghi begins his presser the jobs report will be released. Should it surprise to the topside as ADP did, EUR/USD likely sees sub-1.3600 levels quickly.
USD/JPY Surging Tsy ylds after of ADP pushed USD/JPY above the 200-DMA at 101.75 and inside the 101.70-102.67 Cloud span. Nikkei gains o/n weren’t able to keep the pair aloft headed into the NorAm session, so the ADP lift was crucial. Despite Yellen’s comments downplaying current financial instability risks and the correctness of monetary as a tool to address such risks, Tsy ylds pretty well held their gains and the USD with them. Exporters are said to be offered by 102, but macros were better buyers. The failure to post a close below the 233-DMA the last two days amid moderately oversold daily oscillators and a carom off the lower 21-day Bolli suggest at least a mean reverting to the 21-DMA, last at 102.02 and by the daily Kijun-sen. Reuters’s USD/JPY outlook poll remains generally bullish, with a 102, 105 and 109 the 1, 6, & 12-mo calls. Unfortunately, vols remain historically low and the 1-mo has slipped back from Monday’s minor rebound high. MOF investment flow data tonight, but next week’s will be more important as the first full week of H1. EUR/JPY’s rising along its 200-DMA underside, while GBP/JPY probes its post-crisis highs & AUD/JPY stumbles
Looking Ahead – Economic Data (GMT)
• 23:50 JP Foreign Bond Investment w/e 1486.5b-prev
• 23:50 JP Foreign Invest JP Stock w/e 295.6b-prev
• 23:30 AU AIG Services Index* Jun 49.9-prev
• 01:30 AU Building Approvals* May f/c 3%, -5.6%-prev
• 01:30 AU Private House Approvals* May -0.3%-prev
• 01:30 AU Retail Sales MM* May f/c 0%, 0.2%-prev
• 01:00 CN NBS Non-Mfg PMI* Jun 55.5-prev
• 01:45 CN HSBC Services PMI* Jun 50.7-prev
Looking Ahead – Events, Other Releases (GMT)
• 01:00 AU RBA Gov Glenn Stevens addresses the Australian Conference of Economists and the Econometric Society
• : AU Australian Treasurer Joe Hockey, RBA Head of Financial Stability Department Luci Ellis and RBA Assistant Governor of Financial System Malcolm Edey speak at Economic and Social Outlook Conference
