Currency Updates:
AUD/USD Overall USD weakness allowed AUD/USD’s recovery off the Asia low to persist in Europe & NY. Action was limited though as NY walked in with the pair just below 0.9360. Steady pressure on the USD saw AUD/USD lift toward 0.9375. No further gains were possible though as NZD/USD’s solid bounce recovery from Asia’s 0.8714 low persisted in Europe & NY. This saw AUD/NZD trace below 1.0690 for a brief time in NY. This prevented AUD/USD from mounting any serious rally and aids to keep the 0.9320/30 support zone in play. Bears hope for a break of that support and an eventual test of the 200-DMA near 0.9200. Numerous data points this week may see bear’s wishes come true. Tonight sees June NAB business conditions & confidence readings. The prior readings were -0.72 and 6.94 respectively. Westpac July consumer confidence is due tomorrow and the big June jobs report is due Thursday. If readings across the board are weak, AUD/USD has a good chance of breaking the support.
EUR/USD Europe aided a short-term recovery for the pair as they walked in with the pair just above the late-June lows. The lift had the pair just below 1.3600 into NY’s open. Speculation of reserve manager diversification and noted corporate buying were the main drivers for the lift. Early NY saw a small dip but a CB buyer emerged and pushed the pair back above 1.3600. Soft US bond yields and a generally weak USD allowed for further small gains. A high of 1.3609 was hit. Little pullback was seen and the pair sat just below the high late in the day. There is little in the way of economic data this week for the EZ and US. This may see the pair linger within recent ranges and any EUR/USD moves are likely to take direction from the crosses.
USD/JPY Almost all of last Thur’s USD/JPY rally and daily range on strong NFPs was retraced on Monday. Things got off to a shaky start in Asia when the BOJ’s Nagoya (where Toyota is centered) branch head said some firms in the Tokia region thought further yen weakness was undesirable as it would lift already rising energy costs. The BOJ has reaffirmed it sees no need to up the QQE ante at this point and fewer are predicting QQE2 this year, despite the 2% CPI goal also looking a bit out of reach this year and perhaps next. USD/JPY ran into exporter and range-trading offers in the 102.20s ahead of last Thur’s 102.27 peak, falling to 101.78, where the daily Cloud base & 200-DMA collide. A massive typhoon is headed for Japan’s southern-most islands on Tuesday [ID:nL4N0PI1A8]. This probably didn’t help the already receding Nikkei. The bigger issue for USD/JPY bulls is that without the promise of QQE2, even rising Tsy yields and Nikkei prices may not be enough to push the pair out of it multi-month comfort zone and low vol state. EUR/JPY, too, is struggling to maintain gains against the mildly rising 200-DMA as it approaches the daily Cloud base in the mid 139.00s. Weak German IP & doubts about structural reforms in places like Italy suggest the ECB will be leaned on for more easing. Most crosses softened on the mild risk-off tone today.
Looking Ahead – Economic Data (GMT)
• 22:00 NZ NZIER Confidence* Q2 52%-prev
• 22:00 NZ NZIER QSBO Capacity* Q2 89.4%-prev
• 22:00 NZ Govt Optg Balance* May 9.7%-prev
• 22:00 NZ Govt. Monthly Debt* May 28.1%-prev
• 23:50 JP Bank Lending YY Jun 2.3%-prev
• 23:50 JP Current Account NSA JPY May f/c 403.6b, 187.4b-prev
• 01:30 AU NAB Business Conditions* Jun -1-prev
• 01:30 AU NAB Business Confidence* Jun 7-prev
• 05:00 JP Economy Watchers Poll Jun 45.1-prev
Looking Ahead – Events, Other Releases (GMT)
• 03:45 JP BOJ Dep Gov Nakaso gives a speech on Japan’s economy and monetary policy
