ASIA FX MARKETS OPENMARKETS OPEN FRIDAY, JULY 20, 2012
EUR WEAKER VS. HIGH YIELDERS, LINGERS VS. USD
Market Briefs
• US Weekly Jobless Claims 375k, prev revised up to 377k
• US Continuing Claims 3.31mm, f/c 3.3mm prev rvsd to 3.31mm from 3.3mm
• US July Philly Fed -12.9, f/c -8.0 prev -16.6
• US June Leading Indicators -0.3%, f/c -0.1% prev revised to 0.4% from 0.3%
• MXN May Retail Sales m/m -0.2%, f/c -0.1% prev +0.9%
• MXN May Retail Sales y/y 5.2%, f/c 4.3% prev 2.5%
• CAD May Wholesale Trade 0.9%, f/c 0.3% prev rvsd down to 1.2% from 1.5%
• German FinMin Schaeuble: Spain liable for EU aid to Spanish banks
• S. Africa Reserve Bank unexpectedly cuts Prime Lending Rate 50 bps to 8.5%
• German Bundestag Lower House approves bailout for Spanish banks
• Fitch Ratings affirms Italy at A-, outlook negative
Looking Ahead - Data
• NZD 22:45 June Net migration, no f/c prev 0.10%
• AUD 01:30 Q2 Australian Export Prices, f/c 0.5% prev -7.0%
• AUD 01:30 Q2 Australian Import Prices, f/c 1.5%, prev -1.2%
• CNY 01:35 MNI July Flash Bus. Sentiment Survey
• NZD 03:00 June NZ Credit Card spending m/m, no f/c prev 0.4%
Looking Ahead – Events, Other Releases
• AUD 23:15 RBA Asst. Gov. Kent panel session AU Economic forum
Currency Summaries
EUR/USD Another choppy session with little to determine about overall direction. EUR/USD opened the NY session 1.2300/05 vs last night's 1.2283 close. O/N range 1.2263/1.2325; NY range 1.2229/90, last 1.2275. US equity marts were the central theme to our session, opened the day +0.50/0.73%, close the session by +0.25/1.20%, tech stocks leading the rally. Plenty of reserve manager & sovereign offers above 1.2300, heavy sales of EUR/AUD, EUR/CAD, EUR/GBP et al providing topside supply. Conversely soft US claims, existing home sales & Philly Fed took their toll on the USD also. Custodian bank flow reports reveal real money still selling EUR & USD & buying JPY.
USD/JPY USD/JPY never really recovered from its sell-off in Asia. Semi-official buyers put paid to early bearish ambitions to trip 79.40 stops. Spec profit taking in EUR/JPY was significant ahead of 97.40 in London, but NorAm traders ran stops below there for a 96.13 session low. US data were all worse than forecast, which is feeding into speculation Bernanke will rev up the QE3 rhetoric at the Jackson Hole CB gathering, if not at the FOMC end-July. The yen lost some ground to the commodity currencies again as the CRB breached its downtrend line off last year's highs today. Cross sales kept the USD/JPY damage limit to 78.42. Jun 6 & 15 lows by 78.58 were the last decent historical support ahead of the Jun 1 nadir at 77.65. Tenkan/Kijun/Cloud formations are rather bearish for USD/JPY and EUR/JPY, the latter primed to retest it 95.59 trend lows if intervention doesn't occur first. USD/JPY offers now at 78.70 & 78.90-79.10. AUD/JPY persists with its quest to retest the July high at 82.35. GBP/JPY remains trapped between its Tenkan and Kijun lines, though resistance is better defined in the 123.90-4.00 area for fade trades
GBP/USD GBP opened the session bid up by real money & sovereign buying interest and maintained that strength through the session. EUR/GBP got hammered alongside EUR vs commodity ccys & assorted other currency pairs. Fresh life time lows for EUR/AUD & EUR/CAD seeped into EUR/GBP which slumped to 0.7793 lows ( lowest since October 2008) cable paid at 1.5738, highest level in a month. Today's real money flow reports revealed GBP was #1 bought ccy 24-hrs NY open/NY open and has been the #2 most bought major currency over the past week. UK retail sales rose by a meager 0.1% last month compared to a forecast 0.6% increase, but soft US US claims, existing home sales & Philly Fed more than offset.
USD/CHF The standoff between USD/CHF buyers and sells (EUR/USD seller and buyers) went into a fifth session, with the dollar once again being sold before reaching the previous session high. A Dutch seller (linked to SNB diversification) sold EUR/USD sharply lower, forcing USD/CHF to fresh session highs, but it was not enough to break the string of lower highs. Downside in USD/CHF was limited to 0.9747, a mere 5-pip breach below Wed's lows. Surging commodities and rebounding equity prices fit the general risk-rebound/QE pattern; a pattern normally associate with a setback in the dollar, but US data were uniformly poor, though you could only tell it from slightly lower S-T Tsy yields & tanking bank stocks. 21-DMA's the main USD/CHF target. There's little to recommend the EUR, yet tail risk is being siphoned off and sellers are not being rewarded, which reinforces the summer-time position pruning that's under way. Swiss Trade surplus narrowed in June to 2.25b from 2.52b in May, with Exports and Imports down 2.6% and 3.1% m/m respectively. Year-on-year comparisons were flattered by base effects.
USD/CAD USD/CAD opened Noram marts 1.0075 vs last night's 1.0102 close, having traded a tight 1.0090/1.0106 O/N range (Matching) Noram session range 1.0067/88, last 1.0079 paid. Heavy selling of EUR/CAD drove that pair to lifetime lows, 1.2320 and close to the legacy currency low of 1.2234 (1989) Heavily oversold technicals forced a short squeeze and lifted that pair to 1.2375 rebound highs, closed nearby. Soft US claims, existing home sales & Philly Fed would normally drag stocks down but they closed +0.27/1.14%, lifted by tech stocks following strong results from IBM reported after the close last night. CA wholesale sales +0.9% handily beat (f/c +0.3%)
AUD/USD AUD/USD opened the NY session near its O/N highs. Trading for the session saw consolidation of O/N gains in the 1.0390/1.0455 range. Dips continue to be shallow as the scramble for yield continues. O/N mkt rumors of a China RRR cut aided in keeping the pair elevated. Adding to the bullish outlook were reports that the largest Chinese banks have double their loan amount for the first half of July from the previous month. Mkt talk also swirled of Australian exporters needing AUD for tax payments to the ATO. Talk suggests the exporters looked to buy dips but the opportunity hasn’t been there. Resistance sits 1.0255/75 as offers are reported. A break above could accelerate the rally as exporters may scramble to get their Oz. Not much in the way of resistance after 1.0475 though until 1.0555 which corresponds with the 76.4% Fib of 1.0857-0.9578 move and the March 27 high. Technically the bulls remain in charge. Daily Bollis continue to widen & the RSI indicates a positive bias with no divergence. Australian Export/Import prices are due today & any hints inflation is creeping in could see the rally gather pace. Oz rates mkts are paring back future cuts by the RBA. Should prices accelerate upwards AUD may shine further as yield plays are favored & mkt expectations of future rate cuts could diminish further.
NZD/USD Kiwi began the NY session just below the O/N highs near 0.8050/55 as O/N action saw the pair take out S-T resistance near 0.8020. Mkt talk that high NZD yields are attracting more investors as an alternative to negative yields in many parts of the EZ aided in keeping the pair elevated for the day. The pair consolidated gains during NY as the larger 0.7820/0.8075 range still prevails. A break above 0.8075 may see the trend off the June lows resume as yield hunters won’t want to miss getting long. From a technical viewpoint the bullish outlook is gaining ground. Daily RSI & Stoch had a chance to unwind previous O/B conditions, have turned up and are not O/B. The 21 day Bolli bands have started to widen indicating a breakout could be coming. A clean break above 0.8075/0.8100 could see the pair make a quick run up to the late April highs near 0.8240/50.
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