USDJPY is getting a bit lonely as the JPY sell-off momentum is beginning to fade elsewhere – correction time soon? Meanwhile, EURUSD breaks local support on the weak German GDP data.
An explosive rally in risk appetite and sell-off in bonds accompanied a jump to new highs by USDJPY. But the JPY wasn’t the “weakness leader” as it was very interesting to note that commodities were unable to catch anything resembling a sustainable bid on yesterday’s developments and thus risk appetite couldn’t provide any support for the commodity dollar trio. Some of the strength in USDJPY may be attributed to the thinking that Japanese investors will be increasingly scared out of domestic investments and will find US equities a popular destination. Note that Japanese consumer confidence dipped slightly in April from March levels.
EURUSD managed to close the day far enough away from the 1.3000 level to suggest that a real break is finally unfolding, and this morning’s anaemic German GDP data helped push it to new lows since early April. Note the negative year-on-year performance. France’s recession is deepening as well, as the negative GDP growth number for Q1 was also worse than expected. This underlines the risk of imminent ECB action. Still, EURCHF pushed back higher, some of that likely on JPY weakness contagion (carry trading) and USDCHF made an impressive run to new nine-month highs.
Looking ahead
A packed calendar today, but mostly second-tier data. Note the BoE inflation report out later this morning which will either confirm that EURGBP doesn’t want to break higher for now or the opposite. In the US, we have the Empire Manufacturing survey, the first of the major regional manufacturing surveys.
Technical observations
EURUSD – 1.2930-40 was support and the break opens up for a possible go at the bottom of the range toward 1.2750 and possibly even 1.2660 if we look further back at the lows from last November. The resistance is now the old support.
USDJPY – 102.50 is the near-term focus here as it’s all about keeping up the momentum. I am convinced this is a “confidence trade” that is wrapped up with the rally in global equities and will end spectacularly whenever it does end. It is interesting to note that some of the other JPY crosses are beginning to lag – will be on the lookout for signs of fading momentum,
EURJPY – bad data today able to derail the rally? The rally here has been less convincing than in other JPY crosses and a weak close this week would begin to confirm divergent weekly momentum. Note that the previous high was 131.14 and we need a plunge through that level here to talk up any reversal scenario.
GBPUSD – 1.5200 area is support, but there’s plenty of room to fall further and momentum is still strong. Still looking for an eventual 1.5000 test with first resistance coming in at the day pivot at 1.5250.
EURGBP – today should give us resolution on whether this pair is going to catch a bid for a rally toward 0.8600+ or stay in the lower range. The BoE inflation report is the trigger. A move back higher through 0.8500 raises the odds of triggering a further rally.
USDCHF – impressive new highs and the support comes in at 0.9640 and 0.9625. Next target higher is 0.9750.
EURCHF – 1.2500 is the obvious focus and support has shifted higher now to 1.2450/60
AUDUSD – momentum still very strong – next objectives are the ascending trendline coming in above 0.9800 and then the 2012 lows around 0.9580. Resistance is 0.9925 and then parity
USDCAD – confirming that the higher range is the focus now as the sequence below 1.0100 has now been firmly rejected. Support has come up to 1.0150 and the upside focus will be 1.0250 and then 1.0300+
NZDUSD – momentum still strong and the 0.8162 2013 low is in sight, with 0.8000 as a possible eventual target and 0.8225 as resistance.
EURSEK – ugly CPI data yesterday saw a really to major 8.65 resistance area and 8.60 is now support. A break higher targets 8.75/8.80.
EURNOK – this one has stalled out – raising the risk that the 7.50/7.45 targets won’t materialize. Risk of reversal the longer we pause and with any move back through the 7.5750 area. Note also the sell-off in crude oil.
NOKSEK – almost realized the 200-day moving average target just below 1.1500. Not sure how much more is in the tank after the EURNOK situation has stalled out.
Economic Data Highlights
- Japan Apr. Consumer Confidence out at 44.5 vs. 45.5 expected and 44.8 in Mar.
- France Q1 GDP out at -0.2% QoQ and -0.4% YoY vs. -0.1% / -0.4% expected, respectively and vs. -0.3% YoY in Q4
- Germany Q1 GDP out at +0.1% QoQ and -1.4% YoY vs. +0.3%/+0.2% expected, respectively and vs. 0.0% YoY in Q4.
- Italy Q1 GDP (0800)
- Norway Apr. Trade Balance (0800)
- UK Apr. Jobless Claims Change (0830)
- Switzerland May Credit Suisse ZEW Survey (0900)
- Euro Zone Q1 GDP (0900)
- UK BoE Releases Quarterly Inflation Report (0930)
- Canada Mar. Manufacturing Sales (1230)
- US May Empire Manufacturing (!230)
- US Apr. Producer Price Index (1230)
- US Mar. TIC Flows (1300)
- Canada Apr. Existing Home Sales (1300)
- US Apr. Industrial Production and Capacity Utilization (1315)
- US May NAHB Housing Market Index (1400)
- US Weekly DoE Crude Oil and Product Inventories (1430)
- New Zealand Apr. Business PMI (2230)
- US Fed’s Lacker to Speak (2315)
- Japan Q1 GDP (2350)