Currency Updates:
AUD/USD Europe couldn’t add to losses after Asia set a new trend low for AUD/USD. The combination of a slumping USD and US yields along with rebounds in commodities had shorts scrambling to cover. The buys took the pair from near 0.8425 towards 0.8500 before it pulled back to the 0.8480 area into NY’s open. NY bought the dip as early NY saw the USD and bond yields remain soft. The par rallied above 0.8520 but suffered a nice intra-day set-back after ISM beat estimates. A quick trip towards 0.8480 was seen but buyers were there again and the pair went on to hit 0.8533. The USD clawed back some losses late in the day and the pair sat just above 0.8510 late in the day. Traders now turn their focus to the RBA later. Rates are expected to stay unchanged but the statement might pressure AUD lower. AUD strength is likely to be mentioned again which is nothing new. However, if mentions of lowering rates, as RBA’s Lowe recently noted, and intervention, as RBA’s Kent recently noted, are brought up AUD should trade heavy. It’s then possible today’s short squeeze gets erased and new lows get set.
EUR/USD The JPY strength post-Japan downgrade by Moody’s sent EUR/JPY spiking lower towards 147.05/10. EUR/USD was dragged along reluctantly ad it hit 1.2419. Bears could push no further though as USD weakness trumped JPY. this saw The pair quickly bounce off the day’s low towards 1.2480 before slipping near 1.2460 as NY opened. More USD weakness and a slump for US bond yields saw that dip bought. A high of 1.2507 was hit. Much of NY’s gains were eroded though after US November ISM beat forecasts. the pair slipped down to the 200-HMA, bounced briefly above 1.2500 again but sat just below 1.2475 late in the day. The pair may chop around in the 1.2350/1.2600 range for the remainder of the week. A fair number of option expiries near the 1.2500 region and upcoming event/data risks (ECB, US jobs data) are likely to keep the pair from staying outside that broad range.
USD/JPY The USD/JPY’s fleeting surge to a 7-yr high at 119.15 on Moody’s downgrade of Japan to A1 was followed by a rout that initially found support at the 100 & 200-HMA and the hourly Cloud base at 118.07, but the rebound from there to 118.53 in early NY drew in fresh sellers and a push below the o/n lows and the daily Tenkan at 117.98. A weak US stock mkt opening and pre ISM angst got prices to 117.86, but the above-f/c ISM quickly revived prices and Tsy yields. Though a close below the Tenkan looks like it will be averted, and with it the first major sell signal since the rally began on Oct 15, prices have yet to make a run at the 118.53 intraday rebound highs. The USD was generally weaker amid the overbought rebound in energy and other commodities, thus limiting USD/JPY gains. The Moody’s Japan downgrade may have some resonance if it means the LDP-led coalition’s majority is diminished more than expected due to doubts about Abenomics (3rd arrow particularly), but QQE2 means any rise in JGB yields will be de minimis and BOJ balance sheet expansion will make the yen a sell on rallies sans a global risk-off shake-out.
Looking Ahead – Economic Data (GMT)
• 00:30 AU Building Approvals* Oct f/c 5%, -11%-prev
• 00:30 AU Private House Approvals* Oct -2.3%-prev
• 00:30 AU Current Account Deficit* Q3 f/c 13.60b, 13.70b-prev
• 00:30 AU Net Exports Contribution* Q3 f/c 0.7%, -0.9%-prev
• 03:30 AU RBA Cash Rate* Dec f/c 2.5%, 2.5%-prev0
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
