Currency Updates:
AUD/USD The steady ascent off the July 10 low persisted in Europe as s-t bears became frustrated. AUD/USD was pushed to just above 0.9400 as NY got going. the short covering remained through the early NY hours and a high of 0.9409 was hit. All of the day’s gains were quickly erased though as The Australian posted an interview with the RBA’s Stevens. http://bit.ly/1q3GMt2 He warned of complacency about Australia’s econ growth and noted the AUD was quite high base on most standard metrics. The pair dived to a 0.9376 low. A small bounce had the pair near 0.9385 late in the day. downside risks are extant as last week’s bearish engulfing candle remains valid and a long upper wick forms on this week’s candle. Next week’s event risk may see bears get their wishes. RBA minutes and NAB’s Q2 business confidence data are due. A dovish RBA and poor confidence data could lead to a test of key 0.9320/30 support. If broken the recent slide likely accelerates and the 200-DMA and May low near 0.9200 will then be in play.
EUR/USD Short covering from the July 10 sell-off saw EUR/USD pushed up to the 200-HMA in Europe’s morning. The quieting of the Banco Espirito Santo issue seemed to be the main driver for the gains. Offers at the MA and just above stalled the rally and the pair slid towards 1.3600 as NY got going. NY pushed the pair to a low of 1.3592 with no further losses possible after that. With no data to spark a move and the Fed speakers not breaking any new ground there was little reason for the market to push too far in either direction. The pair lifted off the lows and sat just below 1.3610 late in the day. Bears have been relatively patient as the pair continues to consolidate losses from the May drop but may be rewarded soon. The US has retail sales, PPI, IP and housing data next week. should results come in above forecasts the mkt may up the chances the Fed hikes rates sooner than later. US yields and the USD would then lift. EUR/USD might get a chance to break 1.3475/00 support. If broken a quick move to sub-1.3300 levels is likely as numerous techs supports will be broken. Beyond 1.3300 l-t bears will target 1.3000 & 1.2740/60 supports.
USD/JPY Trading was far calmer on Friday as mid-week derisking flows subsided pre-weekend. CAD/JPY was the outlier, falling after Cad Jobs data. Fin Min Amari making a not-so-veiled threat toward the BOJ to ease again soon to reach its CPI targets, as USD/JPY threatens key support in the 100-101 range that Japan Inc have budgeted for this year, may give dip buyers hope, but also raises 3rd arrow red flags. Nonetheless, the pattern of successively lower price rebounds since the turn-of-the-year peak at 105.45 and JGB yields now having erased all of their post-shock & awe increases are reminders that labor shortages are not likely to be any more helpful to the Japanese economy in the long run than the spike in imported energy costs last year. Will an eventual, sustained rise in US rates lift USD/JPY out of the doldrums or will that simply put more pressure on leveraged asset prices, many funding with cheap yen? In any event, USD/JPY & EUR/JPY are closing the week below their weekly Cloud tops at 101.57 and 138.36; the first such incursions since late 2012. BOJ’s meeting ends Tues. No change expected. IP & CU out Monday. Late word of 6.8 quake in E Japan. (RD).
Looking Ahead – Economic Data (GMT)
• 00:01 CN New Yuan Loans* Jun f/c 915.0b, 870.8b-prev
• 04:30 JP Industrial Output Rev May 0.5%-prev
• 04:30 JP Capacity Util Idx Chg MM May -2.2%-prev
Looking Ahead – Events, Other Releases (GMT)
• : JP BOJ Monetary Policy Meeting ( to July 15)
