Currency Updates:
AUD/USD Early Europe saw the pair near 0.8260 but bears were reluctant to press their luck. USD/JPY went on a slow & steady decline and that inspires some broad based USD long covering. AUD/USD lifted in Europe’s morning and tested old support/now resistance at 0.8315 before dipping below 0.8300 into NY’s open. The pair held to a tight range in NY as it oscillated in the 0.8285/0.8315 range even as the USD was generally soft for the NY session. With calls for the RBA to cut being upped (DB now expects 50bps of cuts in 2015) AUD/USD is likely to have a tough time mounting any sustained rallies. Unless Oz’s Nov employment report presents a big topside surprise to help reverse the recent spread narrowing, it’s likely bears continue to fade the rallies. Some s-t technical bounces may take hold to unwind oversold conditions but those lifts will only present opportunities for longer-term bears. Should the Oz jobs data miss to the downside the pair likely makes a quick move to sub-0.8100 levels and ultimately below 0.8000.
EUR/USD Europe drove EUR/USD towards the mid-Aug 2012 low as JPY strength sent EUR/JPY plunging through 149.10/15 support. Bears took EUR/USD to a 1.2247 low but couldn’t muster further losses as broad based USD weakness trumped JPY strength. EUR/USD lifted towards 1.2270 into NY’s open. The pair’s lift gathered pace after USD/JPY broke below 121.00 and was unable to regain ground above there. EUR/USD’s rally extended, ran weak stops above 1.2310/15 and eventually hit a session high of 1.2344. Profit taking from intra-day USD shorts allowed for a bounce and EUR/USD slipped back near 1.2320 towards the end of the day. The risk of further short covering exists as there are no major data points out of the US or EZ until later in the week and technicals suggest a lift is due. Day/week RSIs diverged on the new low and yield spread widening has slowed a bit. A test of the 1.2505/35 area cannot be ruled out as we head into Nov CPI reports out of the EZ, US retail sales and the ECB’s TLTRO report on Thursday. The long-term outlook remains bearish though and only a move above 1.30 puts doubts into the l-t bear trend.
USD/JPY fell from a 7 year high of 121.86 in Asia, that being a vestige of the post US NFPs rally Friday. It became clear that once Asia had caught up to that news and was digesting unexpectedly bad Japan GDP and Tankan news, the new USD/JPY peak would not be retested this session, as Nikkei futures failed to make new trend highs and trended lower. US Tsy yields also fell, with a major curve flattening bias amid broader derisking and Fed speakers adherence to mid-2015 tightening window. With the EM meltdown on oil and a rising USD spilling over the DM equity markets today, the yen’s haven identity came to the fore, taking USD/JPY back down to where it was before Fri’s NFP surge. Prices pierced the up TL off the Dec 1 & 4 lows, then at 120.43, before finding support at 120.20. Most of the major option expiries into year-end are at or near 120, while the key daily Tenkan support is at 119.55 last. A daily close below there is needed to trigger a deeper correction. Speaking of Tenkan’s, EUR/JPY’s at 148.11 warded off today’s 148.20 low. Thur’s TLTRO results may add a new wrinkle for EUR/JPY. Hi beta crosses remain heavy on risk-off flows.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ Electronic Card Retail Sales mth Nov 1%-prev
• 21:45 NZ Elec Card Retail Sales YY* Nov 5.7%-prev
• 0:30 AU NAB Business Conditions Nov 13-prev
• 0:30 AU NAB Business Confidence Nov 4-prev
• 0:01 UK BRC Retail Sales YY Nov f/c 0.8%, 0%-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
