Currency Updates:
AUD/USD Once Europe got going and saw the boost from the RBA minutes faded and the improved China loan data was shrugged off they smacked AUD/USD down fairly hard. Bears took the pair from near the 21-DMA (0.9398) to just below 0.9360 before the pair bounced near 0.9375 into NY’s open. Light short covering persisted in early NY as the headline US retail sales number missed. The pair stayed firm into Yellen’s testimony & sat near 0.9380. Her prepared text stated a high degree of accommodation is appropriate. The USD spiked lower and AUD/USD lifted but couldn’t breach 0.9400. The pair began giving back gains as US yields gave back earlier losses and Yellen’s Q&A session tilted a bit hawkish. AUD/USD’s slide gathered pace and hit a 0.9348 low that matched the 55-DMA. A bounce ensued as US yields pulled back fro their highs and stocks were firm. Late in the day the pair sat near 0.9370 to leave it down over 0.20% on the day. Traders now look to China’s Q2 GDP later. A soft reading might send AUD/USD through the 55-DMA and below key support near 0.9320.
EUR/USD A disappointing ZEW report and a renewed slide in Portugal’s BES shares saw Europe drive EUR/USD lower. The pair was driven down from the 1.3628 high and back below the 21-DMA. It hit 1.3587 before bouncing towards 1.3605 into NY’s open. Early NY saw a lift to 1.3620 after the headline US retail sales number missed estimates. The lift began to fade after traders delved deeper into the data and decided it wasn’t all that bad. A dip near 1.3590 ensued and the pair sat just above that level into Yellen’s testimony. The Chairwoman’s prepared text noted that high accommodation is still appropriate. US yields and the USD slid. EUR/USD spiked to 1.3612 but the gains quickly reversed. The Q&A session had a bit of a hawkish tilt to it. The USD and yields lifted again and EUR/USD quickly slid lower. A low of 1.3562 was hit. Very little bounce was seen even as US yields gave back some gains and stocks were firm. The pair sat near 1.3565 late in the day as the market may now be thinking that US yields will be rising sooner than anticipated and the ECB will be easy. A 1.3500 test may come soon.
USD/JPY US econ data gave USD/JPY a brief bounce into the Tenkan & last Thur’s 101.66 high. The failure there left prices drifting lower into what was expected to be dovish testimony by Fed Chair Yellen. And though Yellen burnished her reputation for erring on the side of easing, she also made the allowance that if the jobs data continue to improve faster-than-expected, policy could be tightened sooner and more forcefully. She note the high uncertainty of econ f/cs, but the main take-away was that data-dependency persists and there is risk for being caught long Tsys, particularly at the short end, and short USD, particularly vs the yield-sensitive JPY. In the end, 101.66 hurdles and stops were cleared, but offers at 101.75 (21-DMA) held. EUR/JPY faltered near the converging 21-, 200-DMAs and Tenkan by 138.40. The first dip was on the weak ZEW, but a slightly more hawkish Yellen reminded all that dwindling EZ yields and NIRP by the ECB may finally grant the ECB their wish of a weak ccy. The BOJ nipped a tenth off their FY14 GDP f/c, but still see CPI up 1.9% in FY15 vs private f/cs of just 1.1%. GBP/JPY rallied on UK CPI’s rise, other crosses struggled. No Japan data Wed.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ CPI QQ* Q2 f/c 0.4%, 0.3%-prev
• 22:45 NZ CPI YY* Q2 f/c 1.8%, 1.5%-prev
• 02:00 CN Urban inv (ytd) yy* Jun f/c 17.2%, 17.2%-prev
• 02:00 CN Industrial Output YY* Jun f/c 9%, 8.8%-prev
• 02:00 CN Retail Sales YY* Jun f/c 12.4%, 12.5%-prev
• 02:00 CN GDP YY* Q2 f/c 7.4%, 7.4%-prev
• 02:00 CN GDP QQ SA* Q2 f/c 1.8%, 1.4%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
