Currency Updates:
AUD/USD Although the market was generally subdued, AUD/USD’s downside remained in focus. The pair remained under pressure for the NY session as the USD was firm and US bond yields were up early in the day. The pair slid to a low of 0.9259 and held near that level late in the day even as US bond yields gave up their early gains. Bids touted ahead of the August 8th low aided to keep bears in check. Traders are now on the alert for data risk in the Asian session. Oz Q2 housing data (1.1% f/c vs prior 2%) and the NAB July Business Conditions (prior 2.3) & Confidence (prior 7.9) are due. Soft results should keep AUD/USD under pressure and last week’s low might be cleared. If the downside progresses the big 0.9179/0.9203 (200-DMA, 38.2 Fib of 0.8660-0.9505, May low) support zone is in play. A break of that support should see the recent slide accelerate. Wednesday’s US retail sales data might be the catalyst to do that.
EUR/USD Traders largely ignored Stanley Fischer’s first speech as a Fed member where he leaned dovish. They instead focused on the firm USD and early lift in US bond yields. Although action was limited in EUR/USD it did remain on the heavy side for the European and NY sessions. The pair was pushed from just above 1.3400 in Europe & hit a session low of 1.3381 in NY. EUR/USD sat just above the day’s low late in the session even as US bond yields gave up earlier gains. The lift from last week’s low may still have legs though as the market has its largest net EUR short position in 2 years (CFTC). Recent shorts have little to show for their efforts though and they may need to cover soon as data risks are coming. Tuesday brings German and EZ August ZEW reports, Wednesday brings numerous EZ CPI reports and Thursday is Q2 GDP for the EZ and Germany. Should these data points surprise with a good showing, a squeeze might be in the making. Resistance sits near 1.3435/45 with stops beginning near 1.3470. If the stops are run the pair may make a run for the 1.3550 area where the 55-DMA and July 21 high sit.
USD/JPY A rebound in the major equity markets from Friday followed through on Monday, bolstering the Nikkei’s rebound away from its daily Cloud base. But the bargain hunting in equities was not enough to get USD/JPY above exporter offers in the 102.20-25 range. Those offers were clustered below the 100-HMA, but more so below the Aug 1 low and the daily Tenkan line at 102.33. The 200-DMA was also at 102.30. Prices have been either side of that slowly rising MA since mid May. Tsy yields initially bounced slightly on hopes things may be getting better in Iraq, Ukraine, et al, but NATO said today that there was a “high probability” that Russia could intervene militarily in Ukraine. Some fear this could happen under the guise of an “aid” convoy. Bottom line is there remains plenty of uncertainty. Bids are at 102. Hefty spec yen selling in the preceding two weeks has been at least partly been pruned back since. Fri’s 101.51 low is said to guard barriers at 101.50. Japan’s Q2 GDP and US Retail Sales on Wed are the week’s main scheduled event risks. Biggest worry is Japan’s tax-hike hit is much worse than the BOJ or Abe expected. Kijun is key on close for EUR/JPY.
Looking Ahead – Economic Data (GMT)
• 23:50 JP Corp Goods Price MM* Jul f/c 0.4%, 0.2%,-prev
• 23:50 JP Corp Goods Price YY* Jul f/c 4.4%, 4.6%,-prev
• 1:30 AU NAB Business Conditions Jul 2-prev
• 1:30 AU NAB Business Confidence Jul 8-prev
• 1:30 AU Home Price Index* Q2 f/c 1.1%, 1.7%,-prev
• 4:30 JP Industrial Output Rev* Jun -3.3%,-prev
• 4:30 JP Capacity Util Idx Chg MM Jun -0.7%,-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events.
