Currency Updates:
AUD/USD Europe bounced AUD/USD off the 0.8790 area and had the pair just below 0.8820 into NY’s open. Early NY saw bear pressure applied again as better than f/c jobless claims gave the USD a bid. The pair broke Europe’s low but rebounded quickly as USD/JPY dived from 109.30 towards 108.50. The lift touched 0.8826 but sellers were sitting there. The slide began again as risk sentiment soured. Equity and commodity markets traded heavy for the NY session and aided AUD/USD to a new trend low of 0.8774. Only a small bounce was seen in the afternoon and the pair sat near 0.8785 late in the day. Bears have a lot of momentum on their side as day/week RSIs and narrower yield spreads weigh again. Decent support sits at the daily lows of Feb 3 & 4 at 0.8730 but that level may only temporarily slow the slide. Bears are intent on taking AUD/USD to the 2014 low at 0.8660.
EUR/USD Europe crushed EUR/USD from the 1.2770 area down to 1.2696. A combination of German Fin Min Schaueble comments on the prospects of ECB buying securitised loans and covered bonds and very large EUR sales by a UK clearer were the drivers. A bounce off the lows had the pair near 1.2725 into NY’s open. An early dip due to better than f/c jobless claims saw 1.2710 tested. The dip was quickly erased as large USD sales (predominantly vs JPY) saw EUR/USD rally to 1.2765. No one point cold be attributed for the USD sales but talk of the GPIF decision being delayed and a Moscow Times story reporting that a draft law allowing Russia to seize foreign assets due to sanctions may have been part of the reason. The pair pulled back from NY’s high as the USD recovered a bit in the afternoon and the pair sat just above 1.2745 late in the day. Bears have full control of this pair as sentiment grows the ECB will have to do more to expand their balance sheet. A test of structural support in the 1.2650/60 area looks likely as the mkt looks to get short still. Sub-1.2650 eyes 1.2465/00.
USD/JPY Risk hit the skids in NorAm trading, sending the yen higher, particularly against the high betas, while USD/JPY trundled back toward Wed’s lows before finding support. Reports of terror attacks being planned against French and US railways hurt, while a few more doubts crept into the minds’ of traders regarding just how much tightening the Fed could do next year. The seed was planted by Fed’s Dudley on Monday and nurtured since then by other Fed members, including Lockhart today. More specifically, the Fed seems to be trying to link USD strength with less potential room for normalization. Period-end and holiday sapped trading in NY produced accentuated profit-taking in assorted risk trades. USD/JPY’s uptrend remains stymied by barriers at 109.50. It’s also propped up by bids above 108. The Tenkan at 108.13 hasn’t been touched since the 8th. Rumors about GPIF reforms made the rounds, but they appeared to misunderstand that reallocation can go ahead without fresh legislation. EUR/JPY broke its Kijun & 50% Fibo at 138.52; 21-DMA next target. NZD/JPY, & its linkage to equities/risk, is being watched for possible broader risk-reversal confirmation. CPI tonight.
Looking Ahead – Economic Data (GMT)
• 23:30 JPY Aug CPI Core Nationwide y/y f/c 3.2% prev 3.3%; Overall y/y no f/c prev 3.4%
• 23:30 JPY Sep CPI Core Tokyo y/y f/c 2.6% prev 2.61%; Overall y/y no f/c prev 2.72%
• 02:00 CNY Aug CB Leading Econ Index no f/c prev 1.3
Looking Ahead – Events, Other Releases (GMT)
• 23:50 Japan Capital flows data for w/e Sep 19
