Good morning,
Interesting night for the antipodeans in particular with the Australian economy continuing to show resilience in the face of global adversity with the proof in the pudding as they say with retail numbers released at 1.4% beating a consensus of 0.3%. Clearly this gave the little battler a significant boost and trading sprung from around 0.9180 pre release to a high of 0.9268. In my view a slightly exaggerated move but easily explained away by the triggering of mass stops sitting between 0.9235 and 0.9250. Since then things have calmed down a little and the pair is now trading around initial breakout levels of 0.9200. The NZD followed its richer cousin overnight understandably trading to a session high of 0.7430 its regularly visited resistance level, but in unison with the AUD this pair is now trading lower around the 0.7370 mark.
Otherwise we had the FOMC minutes released last night and little if anything can truly be garnered from the declaration. Ultimately I see no immediate change to rhetoric or policy stance and thus the greenback is left to its own devices for the interim. The only piece of interest (clutching at straws here) was the discrepancy in when and how to reign in the current MBS buyback program (told you I was clutching at straws).
This morning we had the newly appointed Japanese Finance Minister Kan on the wires (press conference) telling the world that he would be comfortable in seeing the local currency trading around the 95 level in relation to the big dollar and that a weaker Yen was all in all a good thing for (not in so many words) an ailing economy. The reaction thus far has been muted and the cross still grunts its way to the 93.10/30 resistance levels currently trading 92.85. I remain a sell of the USDJPY but offer the advice to be wary of stops lining the above mentioned levels. As per yesterday’s comments I don’t necessarily feel great about a weaker Yen and truthfully don’t think the market is entirely convinced of the fact either.
On the day I look for the market to be a little muted in anticipation of tomorrow’s NFP and with yesterday ADP data showing a poorer result, I feel that in contrast to the bulk of the market we are likely to see worse than expected data tomorrow which could ultimately also give the greenback another boost if this recent bout of risk appetite all of a sudden loses some of its bite. Otherwise data today will center on the BOE decision (no change on either QE or OCR), Euro consumer confidence which is likely to see the EURUSD move into 1.4430 resistance before being sold off again and of course the initial and continuing claims data out of the US.
On the majors:
EURUSD: Read above but in summary grinds higher to resistance at 1.4430, only to then be sold off in smalls.
GBPUSD: 1.5830 is a definite target today, but don’t be surprised by a small squeeze higher ahead of the BOE announcement into 1.6050.
USDJPY: Steady as she goes and that path is currently towards 93.10/30.
USDCAD: Still a buy on dips, but my gut says that we are likely to see a downside cleanout today (Ivey PMI could be the trigger) with first target 1.0280.
AUDUSD: Fade the move and start scaling into conservative shorts.
Best regards,
Ken Veksler.
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