Currency Updates:
AUD/USD After Asia couldn’t hold AUD/USD above the 200-HMA, Europe immediately applied bear pressure. the slide accelerated as USD/JPY spiked above 118.00 and AUD/USD sat near 0.8645 as NY got going. Early NY saw bears keep the pressure on as USD/JPY stayed firm and covering by EUR shorts drove EUR/AUD towards 1.4450. Soft commodity prices had AUD longs running for the hills as well. AUD/USD erased any gains from the PBOC’s action on Friday and hit a low of 0.8602. Little bounce was seen and the pair sat near 0.8610 late in the day. the pair’s inability to hold above the 10 & 21-DMAs likely have recent longs concerned as that increases the bearish risks. There is no major econ data out of Asia that might affect the pair but RBA’s Lowe speaks at the Australian Business Economists dinner later. We may see some dovish rhetoric or at least another effort to talk down the AUD. If that occurs a test of the TL off the Nov low and low from Nov 20 are likely.
EUR/USD The pair’s inability to break the key 1.2350 level in Asia elicited broad base short covering in Europe & NY. EUR/USD saw a steady rise in early Europe & sat just above 1.2400 as NY got going. The pair ignored USD/JPY’s spike above 118.00 and was instead driven more by EUR/JPY’s rise above 147.30 and serious short covering rallies in EUR/AUD, EUR/CAD & EUR/NZD. NY saw a steady rise and solid offers in the 1.2420/40 region were cleared with the pair eventually reaching a 1.2445 high. Little pullback from that high was seen as a solid two year US note auction weigh on treasury yields. This had EUR/USD near 1.2435 late in the day. With the second attempt to clear 1.2350 failing, the risk of a double bottom grows as a short market starts to lighten up ahead of the US holiday later this week. There is little major data overnight that might affect the pair so the market likely will wait for US Q3 GDP and Nov consumer confidence. It’s likely a big upside surprise will be needed to see bears make a third attempt at 1.2350. If it does break it likely means a resumption of the longer-term down trend.
USD/JPY stops were run below 118 in Asia, only to have buy stops run above 118 ahead of the NY open. USD/JPY rallied to a 118.485 session high by the middle of the NY morning, with talk of real money buying underpinning the move. There is every expectation that GPIF et al will resume their foreign asset buying after a lull the previous week. Below f/c US data, second-tier as it was, kept USD/JPY bidding contained. Japan returns from holiday tonight with a bang. BOJ Minutes and a Kuroda speech/Q&A should provide some interest, though after the 8/1 vote at the last meeting we doubt any sea changes will be revealed. The focus now is how Abe’s coalition hold up in next month’s snap election. In the interim, QQE2 and GPIF reallocation will keep the yen a favored sell, particularly vs the USD and any others with CBs not on the cusp of aggressive easing. 119 remains the topside pivot for USD/JPY. Light stops are set above 118.50. EUR/JPY is technically top-heavy after Friday’s bearish close. Today’s 147.32 high is by the hourly Cloud top and 50% of the 149.12-145.59 slide.
Looking Ahead – Economic Data (GMT)
• No Significant Data
Looking Ahead – Events, Other Releases (GMT)
• 23:50 JP BOJ Oct 31 MPC meeting minutes
• 01:00 JP BOJ Governor Kuroda Speaks in Nagoya
• 04:00 JP BOJ Deputy Governor Nakaso Speaks in Tokyo
