Currency Updates:
AUD/USD Sounding like a broken record, but the sideways churn continues. The NorAm session was a mirror image of the previous day, this time with AUDUSD briefly washing out the bottom of the recent range below .9290 before recovering back above .9300 fig. The Fed minutes read more hawkish than the rate markets were pricing the past week, but the tone is tempered by a general state of macro malaise (especially in Europe) since the meeting on July 29-30. The US-AUD rate diff dynamic remains relatively steady. AUD ended the day under some pressure but the pair continues to be trapped by conflicting forces of a broad USD rally and a snappy stock/spread product up-move. Tactical, not strategic, trading remains the best bet for now.
EUR/USD Oversold or not, and with net spec EUR IMM shorts near ’12 wides, the surprise for some this week is the renewed breakdown in the EUR/USD sans a meaningful correction. Today’s drubbing began with barriers and stops at 1.3300 knocked out, reportedly after ACB offers ran over RM and spec buyers. That move took prices below the Nov ’13 lows at 1.3295 and threatens a weekly close below the weekly Cloud base at 1.3317, which would be a major technical blow. Prices have resumed their fall in the NY afternoon after FOMC Minutes revved up rate hike/tightening and even eventual balance sheet contraction speculation. The US curve steepened via higher S-T rates, leaving EUR/USD in the 1.3250s, with talk of another barrier at 1.3250. A weekly close below 1.3300 would open the door to a M-T retest of the Apr ’13 nadir & lower 100-wk Bolli in the mid 1.2700s. There’s been speculation of late about the EUR becoming a favored funding currency, but the yen won that contest hands down today, putting the 137.63, the 23.6% of 143.79-135.73 slide, back in play. EUR Markit PMIs are on tap Thur, along with US Claims, Philly Fed & Existing Home Sales.
USD/JPY The yen was the best funder today. USD/JPY cleared the late July peak at 103.15 in Asia and then surging again after the FOMC Minutes showed recognition of the firming labor market increasing and more concrete tightening steps being worked out. Prices initially stalled at 103.41 into the NY open, but have been as high as 103.75 since the Minutes. The April 4 swing high at 104.13 is the next historical hurdle, though we suspect the die has been cast for a retest of the Abenomics peak at 105.45 and perhaps the 61.8% of the post-crisis slide at 105.59. The weekly Tenkan is poised to cross back above the Kijun next week after prices probed the Cloud below in July & Aug but couldn’t retest the May lows. And unlike previous ’14 rallies, this one comes with the daily Tenkan & Kijun lines above the daily Cloud, rather than inside or below it. Japan’s Trade deficit was above f/c, but solely due to the unexpected rise in Imports. EUR/JPY & most other yen crosses rebounded today, though GBP/JPY may be the most interesting case coming off failed 200-DMA probes and a split MPC rate vote. Daily Cloud base at 172.42 is key above.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ Ext Migration & Visitors* Jul 2%-prev
• 22:45 NZ Perm/Long-Term Migration* Jul 4270-prev
• 23:30 JP Reuters Tankan DI Aug 19-prev
• 23:50 JP Foreign Bond Investment w/e 232.6b-prev
• 23:50 JP Foreign Invest JP Stock w/e -584.9b-prev
• 01:45 CN HSBC Mfg PMI Flash Aug f/c 51.5, 51.7-prev
Looking Ahead – Events, Other Releases (GMT)
• 23:30 AU RBA Gov Stevens testifies before the House of Representatives Standing Committee on Economics, Brisbane
