Currency Updates:
AUD/USD Bear pressure remained on AUD for Europe & NY. Rotations out of EUR shorts and into longs vs. AUD, NZD, CAD & JPY combined with another heavy day for iron ore to keep AUD/USD weighed down. Europe pushed the pair below 0.8430 as NY got going. NY saw an early lift as housing data was on the soft side. The pair lifted towards 0.8655 but ran out of gas. Persistent USD strength and a rebound in US bond yields saw the pair near 0.8610 before action settled near 0.8625 into the Fed minutes. The market’s initial reaction the minutes was deemed dovish as the USD got hit hard. AUD/USD spiked up to 0.8658 but the move quickly reversed. All the gains were given back and a new low was set as the pair begins working through bids in the 0.8605/0.8590 region. The Nov 11 low is the last bit of support before the 2014 low comes into play. Stops are noted below 0.8590 and may get run as day/week RSIs are biased down and spreads narrow. A break of the 2014 low opens the door to the May 2010 low near 0.8066.
EUR/USD Modest short covering was the theme in Europe’s morning and early NY. EUR was bought vs many of the crosses with AUD,NZD, CAD and JPY the notable standouts. This saw EUR/USD lift from near 1.2410/15 towards 1.2450 before it slipped back near 1.2530 into NY’s open. Early NY saw shorts cover more as soft US housing data dented the USD’s lift while US yields slipped a bit. Stops above 1.2550 were hit and1.2571 touched before the pair pulled back to hourly support near 1.2520. The dip was bought as EUR/JPY bounced off intra-day support near 147.45 and EUR/CHF rallied after the latest Swiss gold referendum poll showed 47% are opposed. 1.2565 was neared as the FOMC minutes were released. Initial market reaction was deemed dovish and the USD got hit. EUR/USD spiked up to 1.2602 but the gains were quickly given back as USD/JPY rallied above 118.00 and US bond yields rallied. Hourly support near 1.2520 was threatened again but it held. Little bounce was seen and the pair sat just above the support late in the day.
USD/JPY Despite a brief setback after the FOMC Minutes had a dovish tone to them, and Tsy yields dipped briefly, USD/JPY remains on an upward path, driven by QQE2 and GPIF asset reallocation. QQE2 was solidified by the BOJ’s 8/1 vote backing it at the just-ended policy meeting. Moreover, assuming the LDP-led coalition win the Dec 14 election, the reflation efforts will persist and perhaps even intensify if growth and inflation do not rebound as hoped next year. Barriers at 118 were removed after the Minutes, along with the Oct 2007 swing high at 117.95. Probing for stops above 118.10 at this writing. The broader 120 target and the pre GFC peak at 124.14 are the broader objectives. Yen crosses, save for the falling AUD & NZD, were dragged higher by the yen’s slide, while GBP/JPY got an extra lift from less dovish than expected BOE Minutes. That cross is pressing against 185 heading toward the NY close. EUR/JPY plied new trend highs of 148.10 after the Minutes release, but EUR/USD sank faster than USD/JPY gained after that, at least so far. There isn’t much historical resistance until the 152 vicinity. Weekly flows & Trade data from Japan tonight.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ Producer Prices QQ* Q3 -1.00% -prev
• 21:45 NZ PPI Output* Q3 -0.50% -prev
• 23:50 JP Foreign Bond Investment w/e 1123.9b -prev
• 23:50 JP Foreign Invest JP Stock w/e 1055.2b -prev
• 23:50 JP Exports YY* Oct f/c 4.5%, 6.90%-prev
• 23:50 JP Imports YY* Oct f/c 3.4%, 6.20%-prev
• 23:50 JP Trade Balance Total Yen* Oct f/c -1050.0b, -958.3b-prev
• 01:45 CN HSBC Mfg PMI Flash Nov f/c 50.3, 50.4-prev
Looking Ahead – Events, Other Releases (GMT)
• 05:00 JP BOJ Monthly report
