Currency Updates:
AUD/USD Action was a bit limited for the pair but AUD/USD did have a bearish tint to it for Europe & NY. The pair slid from 0.8218 in Europe’s morning towards 0.8205 as NY got going. Bear pressure remained in NY for the most part as broad USD strength permeated the markets. AUD/USD dipped below 0.8170 in NY and remained there late in the session. Further losses might have been recorded were it now for AUD/NZD’s break above 1.0650 to a new trend high. Oz January consumer sentiment data is due later. The prior reading was -5.7. A deterioration of the previous data may see AUD/USD come under further pressure and possibly break support at the January 15 low.
EUR/USD The pair held to a relatively tight range for Europe & NY but EUR/USD did lean a bit bearish for both sessions. Europe dropped the pair from the 1.1615 area towards 1.1575 as NY got going. JPY weakness in early NY pushed EUR/JPY towards 137.65 and this took EUR/USD back above 1.1605 for a brief period. Bears emerged though as broad USD strength was the dominant theme for NY. EUR/USD steadily slid lower and tested 1.1540. Very little bounce was seen as the pair lingered near the lows late in the day. There is little econ or event risk for Europe & NY that would drive the pair so traders will likely look to external factors. The UK sees the MPC meeting and the BoJ Monetary Policy statement are the main risks for EUR. As it stand the long-term bear trend remains but some consolidation is likely into the ECB. RSIs are o/s and need unwinds but the market still looks to sell rallies and the pair struggles on moves above 1.1630/40. We may have to wait until Thursday to see if the next bear leg takes hold of is a big short squeeze runs its course.
USD/JPY Last Friday’s failed attempt to retest the Dec lows and the strong close that session set the stage for today’s rally up through the daily Cloud top, the Tenkan, the Kijun and the down TL off the Jan highs. That broken TL was used as support in Noram trading as prices corrected into midday. New recovery high since then has put offers between 118.85-119 in play ahead of the 21-DMA at 119.09. The intraday rebound got legs after the US equity and Tsy yield slides were erased, or nearly so, as the day wore on. N225 futures had outperformed S&Ps o/n on speculation of some kind of BOJ easing tweak at tonight’s policy announcement. Another major QE looks extremely unlikely this close to the Oct surprise and because the front of the JGB curve has already gone negative and the back end is causing headaches for pensions and insurer who can’t match assets with liabilities. In any event, the late Dec-early Jan highs in the upper 120.00s are back in play. Sell-the-news unwinding of oversold EUR/JPY trades into the ECB meeting lifted it again, but a close above the Jan 15 high at 138.78 is needed to make this more than short-covered rally.
Looking Ahead – Economic Data (GMT)
• 23:30 AUD Jan Westpac Consumer Sentiment no f/c prev -5.7
• 04:30 JPY Nov All Industry Activity Index
• 05:00 JPY Nov Leading Econ Index
• 05:00 JPY Nov Coincident Index
Looking Ahead – Events, Other Releases (GMT)
• 02:00 USD President Obama speech
• JPY BoJ Monetary Policy Statement
