Currency Updates:
AUD/USD AUD continued to benefit from upbeat data in European trade. AUD/USD added to gains from Asia and sat just above 0.9320 into NY’s open. The USD was generally weak in early NY and the pair pushed further. A high of 0.9352 was hit before the pair slipped back near 0.9340 late in the day. JPY strength persisted in NY’s afternoon to push AUD/JPY from 98.14 towards 97.90 and aided AUD/USD’s slide from the high. Traders now turn their focus to Oz retail sales and trade data. Should sale beat forecasts the mkt might being to rethink the RBA’s neutral rate stance especially after Stevens’ tip to the dangers of housing prices. Solid results from sales & trade might propel AUD/USD above the 55-DMA and key s-t res near 0.9375/80. IF that occurs the July high is back in play. Soft data results likely see the pair linger in its recent 0.9235/0.9375 range.
EUR/USD Bears were looking for an excuse to lighten up on shorts ahead of tomorrow’s ECB meeting. News out of the Ukraine/Russia situation seemed to indicate tensions were easing. EUR/USD spiked up above 1.3155. Some contradictory follow-up statements on the issue saw some of those gains erased and the pair slipped towards 1.3140 into NY’s open. NY pushed the pair higher early as the USD was soft and bond yields slipped from their highs. A high of 1.3160 was hit but Asian offers sitting 1.3160/70 capped the rally. Soft stocks and JPY strength then pressured EUR/JPY from its 138.28 high towards the NY low of 137.73. This helped EUR/USD slips from its high and down to 1.3135 before rebounding just above 1.3140 late in the day. EUR/JPY saw only a slight bounce off the low and sat near 137.80 late in the day. Traders now look to the ECB for their next cue. Action by Draghi isn’t expected by many but a surprise cannot be ruled out. Should the ECB act with a new easing measure EUR/USD’s bear trend should resume. A quick test of the psychological 1.30 level is then probable.
USD/JPY There wasn’t enough momentum or fresh justification to push USD/JPY up to and through its 105.45 2014 peak o/n; not with the market so heavily short the yen/long the USD already on the eve of the ECB & BOJ Thur and Fri;s US NFP. Abe’s new Cabinet was as leaked and his speech kept alive speculation more BOJ easing will be needed at some stage and that GPIF reallocation away from overweight JGBs will occur. Not a new story by any means. Japanese exporters were noted to have offers ahead of the 105.45 peak and 105.50 barriers/buy stops, having budgeted for closer to 100 this year. Softish second-tier US data, a fresh round of Tsy buying, after a back-up to start the week, and Nasdaq-led US stock losses dragged on USD/JPY in NorAm trading, as did doubts about any Ukraine cease fire, as was rumored o/n. Beige Book and Fisher’s comments were innocuous. Bids at 104.80-85 and a more at 104.35-45, but are stops below the latter. Main trend is up. EUR/JPY rallied on the Ukraine cease fire speculation and Lautenschlaeger’s comments that Draghi’s JH speech was about structural reforms. Daily Cloud top pierced, but closed well below. No change exp fm BOJ.
Looking Ahead – Economic Data (GMT)
• 23:50 JP Foreign Bond Investment w/e -609.0b-prev
• 23:50 JP Foreign Invest JP Stock w/e 174.6b-prev
• 01:30 AU Retail Sales MM Jul f/c 0.4%, 0.6%-prev
• 01:30 AU Trade Balance G&S (A$)* Jul f/c -1510m, -1683m-prev
• 01:30 AU Goods/Services Imports* Jul -1%-prev
• 01:30 AU Goods/Services Exports* Jul 0%-prev
Looking Ahead – Events, Other Releases (GMT)
• 03:00 JP Bank of Japan Monetary Policy Meeting, No change expected
