Currency Updates:
AUD/USD The pair continued to hug the territory surrounding 0.9400 as its magnetic grip persists. Europe saw some recent shorts cover to bring the pair just above the 21-DMA (0.9400) into NY’s open. NY pushed a bit higher but couldn’t gain much traction as 0.9413 turned out to be the high. With little data to drive the pair over the next session it’s likely tight ranges will hold until major event/data risk on Wednesday (Fed, US GDP, ADP). Should that risk result in a firm USD, AUD/USD longs could be in for some pain. CFTC stats show net-long AUD positions have been building since April. Those longs have little to show for their efforts as the pair has basically ranged 0.9200-0.9500. Risks due later in the week that favor the USD may see those longs throw in the towel. We may then see a run for the exits and key supports near 0.9320 and 0.9190/0.9200 (200-DMA, May low) get tested.
EUR/USD NY saw tight ranges carry over form the overnight session. The pair did have a tint of short covering added to it as specs lightened up ahead of big event and data risk due later in the week. Short covering in NY saw the pair trade from 1.3430 to a high of 1.3444. the long-term trend remains bearish but further short covering may persist as the upcoming Fed meeting is not expected to rattle expectations too much. Being that there is only an accompanying statement released at the decision and no direct Yellen comments traders aren’t expecting too much form the Fed. Most traders believe the Fed won’t give any hawkish tips and this could aid further short covering into the meeting. The US GDP, ADP and NFP data will get more focus. Should the results be favorable for the US econ, bond yields should lift and EUR/USD’s slide should resume. It’s likely the 200-Week MA will be cleared and the pair may make a run to sub-1.3300 levels into the weekend.
USD/JPY The Nikkei took out the July highs to begin filling a 15,690-15,485 gap from late Jan, which was enough of a boost, along with a rise in Tsy yields, to keep USD/JPY nearly pinned to its daily Cloud (101.90-92) for most of Monday. A soft US Market Services Employment reading and downside miss in Pending Home Sales helped engineer the 101.76 late-London low, but prices are closer to the 101.91 highs heading toward the NY close. Beyond the Cloud are offers into 102 option barriers and heavy expiries on Thurs. 1-mo riskies have seen the bearish skew nearly erased, while 1-mo ATM vols have slipped intraday and remain near historical lows along with historical vols. So if a breakout is brewing, the market isn’t prepping for it. The converged 100 & 200-DMAs at 102.05/15 last have some buy stops beyond them. The thinness of the daily Cloud suggests it will be breached, but the down TL from Jan, at 102.37 Tues, may well suffice as a topside target. EUR/JPY remains wedged between this year’s 136.25 low and recent highs by 137.35. Tight ranges for the other major crosses ahead of key US event risks. Japan Jobs and Retail Sales data out tonight.
Looking Ahead – Economic Data (GMT)
• 23:30 JP All Household Spding YY* Jun f/c -3.80%, -8%-prev
• 23:30 JP All Household Spending MM* Jun f/c 2.2%, -3.1%-prev
• 23:30 JP Jobs/Applicants Ratio Jun f/c 1.09, 1.09-prev
• 23:30 JP Unemployment Rate Jun f/c 3.5%, 3.5%-prev
• 23:50 JP Retail Sales YY Jun f/c -0.5%, -0.4%-prev
• 01:00 AU HIA New Home Sales m/m Jun -4.3%-prev
Looking Ahead – Events, Other Releases (GMT)
• 01:30 JP BOJ board member Koji Ishida meets business leaders in Shimonoseki
