Currency Updates:
AUD/USD The rebound off Asia’s low looked set to continue through the NY session. The o/n lift had AUD/USD near 0.9315 into NY’s open. The lift persisted in early NY as the USD was generally soft and US bond yields were off their overnight highs. AUD/USD began working through offers in the 0.9325/40 structural resistance zone. It hit a high of 0.9331 but couldn’t manage further gains. A recover in US yields and EUR/USD’s inability to rally above 1.3220/30 got USD bulls back in the game. AUD/USD slid from the day’s high into Europe’s close and throughout NY’s afternoon. All of the early NY gains were erased and the pair sat near 0.9305 late in the day to leave the pair nearly unchanged. Another failed attempt to break 0.9330/40 resistance may be taking its toll on recent longs. Frustration may be growing and the increased bid for the USD may see AUD longs give up the ghost. Another test of support in the 0.9230/40 zone may be in order as the recent range looks set to hold.
EUR/USD Consolidation & a short squeeze threat was the theme o/n & that theme looked set to carry though NY. An early NY dip ~1.3185 was bought as US bond yields & USD were soft. The durable goods core reading was disappointing & aided the buyers. EUR/USD rallied towards 1.3210 & looked set to try a run for 1.3230 stops. The lift faltered though as sovereign sellers capped. A steady drift took hold & the pair neared the early NY low after US consumer confidence was well above estimates. EUR/USD bears that were looking to fade a bigger rally missed their chance much like they missed out on selling rallies in July. The USD began firming further & bond yields bounced to send EUR/USD through 1.3175/80. Stops were run and a new trend low of 1.3164 was hit. Very little bounce was seen and the pair sat near 1.3170 late in the day. Next week’s ECB meeting is gaining significance as mkt sentiment grows that Draghi may move sooner than expected. If Draghi acts it’s likely 1.3100 will be cleared and the psychological 1.30 level will be in play.
USD/JPY Asia dumped USD/JPY, but the break below Monday’s lows and assorted hourly chart supports quickly attracted dip bidders late in Asia and then in Ldn and NorAm trading. Demand grew in NY after assorted 2nd-tier US data releases beat expectations. Dip buyers are running into a bit more long USD profit-taking 104+ as month-end nears and as prices remain o/b. Today’s high failed to clear the upper 21-d Bolli after being above it the preceding four sessions. Nevertheless, today’s long-legged Candle shows demand is brisk on any discounts. 104.50 barrier defenses linger, along with this year’s 105.45 high & the 61.8% of the ’07-’12 slide at 105.49. There is a slew of Japanese data out Friday into mo-end, an event that would normally argue for bulging long USD positions being pruned. EUR/JPY clings to support by 137 amid speculation Draghi’s JH speech will be a precursor to fast-tracking of ECB QE, beginning with already touted ABS, though the amounts there are modest at this stage. EZ CPI is also out this Friday and will tend to intensify or reduce talk of more easing at the Sep 4 ECB. The BOJ is seen steady at least until Oct.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ Food Price Index* Jul 1.4%-prev
• 01:30 AU Construction Work Done* Q2 f/c -0.3%, 0.3%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
