REUTERS & IFR Markets Currency Summaries EUR/USD Europe crushed EUR/USD to 1.2590 after EZ CPI was initially reported below f/c. Broad based USD strength exacerbated the move. Early NY saw that USD strength carry over and EUR/USD was driven to a new trend low of 1.2571. The USDs rally abated and EUR selling relented. A profit taking lift took hold. The lifts pace increased though. A combination of a string of below f/c US econ data and an upward revision to the EZ core inflation estimate from 0.7% to 0.8% y/y from Eurostat aided to speed the rise. EUR/USD rallied to 1.2635. The USD remained somewhat soft in NYs afternoon and EUR/USD sat just below NYs high late in the day. The market remains in sell rally mode and offers are touted in the 1.2655/60 area with more in the 1.2690/00 area. The risk of a squeeze remains but a squeeze is unlikely to gain much traction as the ECB meets Thursday. The market is expecting the ECB to up its easing arsenal at some point in order to seriously expand its balance sheet and EUR likely stays heavy as a result. USD/JPY Soft Japanese data o/n and decent gains in Tsy yields accompanied the late-Asia to early NorAm rise in USD/JPY to 109.86. Mostly below-f/c US data and still fairly staunch resistance into the 110 barriers, spec P/T & exporter offers, as well as PRDC structures were enough at period end to foster a pullback to the hourly Kijun at 109.50. USD/JPY then settled into a quiet range between the days high and the importer and fund bidders at 109.50. More bids are noted just above and into 109, by the 10-DMA & Tenkan lines. Those line should be at or a bit above 109.50 Wed. Interestingly, USD-JGB 2-yr spreads havent made new highs since the 24th and 10-yr spreads peaked on the 18th. That USD/JPYs been able to make new highs since then shows at least some of the USDs appeal is as a safe haven; a category the yen used to dominate when Japan was deflating, it ran Trade surpluses instead of deficits, and before the BOJ launched QQE. Next week the BOJ will have another shot at revising down its reflation expectations closer to the market and the econ results since Aprils consumption tax hike, but QQE2 will likely have to wait. GBP/USD EUR/GBP fell below 0.7800 in early European trade to accompany talk of an EU Common Agricultural Policy bid for quarter-end payment to British farmers via Defra, a UK govt department. The cross fell to a 26-month low at 0.7767 after the release of annualized EZ HICP inflation, which fell to 0.3% in Sept from 0.4% in August; core inflation fell to a softer than expected 0.7%. The consistently weak EZ data has increased the risk of further loosening of ECB monetary policy. The UK is expected to hike rates early next year, which has kept the euro offered recently versus the pound. Cross support at 0.7756 the Jul 2012 low, a move below eyes Oct 2008 lows by 0.7694. Cable took a more circuitous route, the pound rose to highs near 1.6275 on touted Middle East buying and orders related to the month end farm payments. the pound weakened to 1.6166 before reversing to 1.6210 as the NY session closes. This week’s key events, the ECB on Thursday and US NFP on Friday likely see some position squaring which may lift the cross. The ECB is likely on hold until after TLTROs in Dec, but there is an outside chance Draghi may act to resuscitate growth. USD/CHF A 0.96 handle in USD/CHF was nearly reached in early NorAm trading, that after prices cleared the 76.4% of the 13-14 slide at 0.9570 and the 161.8% Fibo-projected top off this years lows at 0.9582. But the dollar retreated after the figure held and with EUR/USDs latest plunge pausing in front of 1.2500. Soft EZ CPI was the latest driver of EUR and CHF weakness. US data underwhelmed, knocking back Tsy yield gains and some of the USDs o/n gains. An FT article saying Draghi would push to expand ABS purchases to Greek & Cypriot tranches that are subprime, due to sov ratings below ECBs BBB risk threshold, got some play. Taking on greater risk might be the only way the ECB can expand its balance fast enough and far enough to meet reflation goals, but such a much would be at odds with German legal rulings, BuBas ethos and perhaps even the ECBs mandate. Theres a host of resistance between 0.9619 & 0.9720 on monthly charts that if cleared and closed beyond would reinforce the reversal of the downtrend from 00-11; potentially unleashing a L-T retracement to the 1.1360 vicinity. PMIS Wed, ECB Thur & NFP Fri are key events. USD/CAD opened Noram marts 1.1177, +12 pips vs the close, O/N range 1.1135/77, AUD/CAD +20 pips 0.9743, DXY +0.70%, EUR/CAD -80pts, c 1.4075 - soft EZ Sep HICP the catalyst Euro Briefing . The DXY was bid up in early trade and a soft Canadian monthly GDP print took out the 1.1200 barriers, peaking at 1.1205 initially, ebbing to 1.1166 before a second surge ahead of the noon BoC fix squeezed out fresh 1.1219 highs. Initially there was no talk of 1.1225 barriers but after the stiff defence theres some talk now. 1.1250s are known to be in play. USD/CAD saw out the afternoon 1.1197/10, the DXY +0.4% after a bout of profit-taking trimmed gains. AUD/USD Broad based USD strength in Europes morning saw most of Asias gains erased. The pair fell from the days 0.8768 high & sat near 0.8720 at Nys open. Further USD gains early on saw NY hit a low of 0.8706 but no further losses were possible. EUR/AUDs plunge from above 1.4585 towards 1.4420 and some give backs in USDs rally combined with some soft US econ data to allow AUD/USD a lift from the NY low. The rise saw the pair near 0.8760. Short covering into tonights Oz retail sales & Chinas Sep NBS Mfg- PMI likely aided the lift. Late in the day the pair sat just below 0.8760. The market is positioned short so topside surprises to the Oz & China data later may see a decent squeeze. Oversold day/week RSIs need unwinding and may exacerbate a squeeze should one take hold. If the data is rotten then the 2014 low is likely back in play. NZD/USD Europe erased most of NZD/USDs gains made in Asia. The USD was firm across the board and this aided the pairs slide from above 0.7831 towards 0.7750 into NYs open. Early action saw the pair slip further to 0.7739 as the USD stayed firm but the pair reversed direction. A bout of softer than f/c US econ data sent US bond yields lower and eroded some gains for the USD. NZD/USD drifted higher and touched 0.7813. A late day pullback had the pair near 0.7800 towards the close. There is no NZ data to drive kiwi so traders look to Chinas Sep NBS Mfg-PMI, Aussie retail sales and US Sep ISM Mfg data for cues. Theyll also be focused on the next Global Dairy Trade milk auction due tomorrow. The trend for milk prices has been down. Another weak result might see NZD/USD test the 2013 lows. LATAM USD/BRL ends the NY session near unchanged, but had a far from quiet day. USD/BRL rose in early NY after the release of worse than expected Brazilian data. Brazils Primary budget deficit was larger than f/c (-14.46b v -5.1b), the weak data added to prevailing sentiment of a earlier than f/c US rate hike lifted USD/BRL to highs of the day by 2.4620 before a slew of weak US and Canadian data helped weaken US rate hike sentiment. USD/BRL fell to 2.4240 before moving higher. With Brazilian elections on Oct 5, the markets continue to focus on recent gains in the polls by Pres Rousseff. Todays weak fiscal data underscores the fears of market participants that another Rousseff term may lead to further economic malaise in Brazil. USD/BRL succumbed to the prevailing risk on mood and ends the NY session by 2.4450. USD/MXN seized on the weak US data and moved from near 13.50 to lows of the day at 13.41 before reversing to end the session by 13.4250. The dovish nature of the data, easing future funding concerns, had mkt participants lighten long USD position. USD/CLP shrugged off weak copper prices/output moved to lows at 598.50.
Posted on: Tue, 30 Sep 2014 20:37:27 +0000
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