USDJPY – Once More to 110.00?

USDJPY – Once More to 110.00?

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Last week’s tepid US CPI readings and the weak NFP readings the week before that have cooled traders expectations of Fed rate hikes going forward with the market essentially pricing in the prospect of only 3 hikes this year.

Fed officials, however, continue to assume a hawkish stance with Cleveland President Mester reaffirming the view that inflation may go above the 2% range. So far the Fed analysis has been far too optimistic core CPI readings did push through the 2% ceiling last month – but only just – marking only the second time this year that the core readings have risen above the 2% level.

Part of the reason for muted inflation readings is the woefully slow gains in average hourly earnings. Given the tax cut, the stimulatory aspect of fiscal policy and the relative tightness of the labor market, economists expected nominal wages to rise between 3.5%-4.0% by now, yet the gains have only been 2.6% creating very little real wage growth for the US consumer.

Tomorrow’s US Retail Sales will provide the most important view of the state of US final demand. The market is anticipating a rebound in US Retail Sales of 0.5% from 0.2% the month prior. If Retail Sales improve USDJPY will make another run at 110.00, but if the number misses its mark once again and shows a paltry growth of 0.2% or worse, the Fed futures market will start to pare its bets regardless of what the Fed officials will say as evidence will continue to mount that case for further tightening is simply not there.

USDJPY – Going for 110.00?

USDJPY – Going for 110.00?

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Despite less than stellar US data, USDJPY shrugged off concerns over slowdown and plowed ahead as the bulls have 110.00 firmly in view. Tomorrow the market will get a look at ADP and FOMC statement and as long as jobs print at 175K or better and the Fed reaffirms its hawkish stance the markets are likely to test the ket resistance within the next few days.

Although US economy shows some signs of a slowdown, it remains well in expansionary territory and its monetary policy continues to be the most restrictive in the G-11 universe and that above all else is keeping USDJPY propped up for the time being.

USDJPY – Heading to 110.00?

USDJPY – Heading to 110.00?

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USDJPY cannot hold its gains. Despite a dovish BOJ, despite a budget deal in DC, despite US yields trading well above the 2.50% on the benchmark 10 year, the pair remains in sell the rally mode.

As we noted this morning,”The FX markets remain skeptical about Fed’s gradual tightening program given the persistent state of turmoil in DC and the prospect of further trade tensions between the US and the rest of the world. NAFTA talks begin today and they will be seen not only as a barometer of trade relations in North America but as a harbinger of US trade policy going forward. Yesterday’s tariffs against solar panels and washing machines may have been the first salvo in the Trump administration’s war on trade and the FX market appears to be reflecting the general investor angst over this course of action.”

Tomorrow the market will get a smattering of 2nd tier US housing data, but the focus of the market will be on technicals levels. The longer the bears control the field of play, the more likely it will be that 110.00 will be run.

AUDNZD – Back to 1.1000?

AUDNZD – Back to 1.1000?

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New Zealand Dairy Auction was a disaster today. Price dropped by their biggest amount in a year as the rate declined by -3.9%. Overall in the past half year price have fallen in 4 out of the past 5 months and that does not bode well for the kiwi economy as milk is the country’s primary export. The NZDUSD slid below the 7000 figure, but we believe the fall cab steepen substantially over the next few days as New Zeland reports Trade Balance and GDP figures.

If the data disappoints then kiwi could slide below .6900 and that is likely to push AUD/NZD above the 1.1000 level. AUD/NZD has found solid support above the 1.0850 level and now looks ready to take off above the 1.1000 figure to challenge the highs from the start of the month.

USDJPY – Back to 110.00?

USDJPY – Back to 110.00?

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One of the better setups in trading is when the news on a pair is positive but the price action is negative. That suggests further downside action for USDJPY which saw just this dynamic today as it failed to hold fresh highs after a strong ADP number.

As Kathy noted earlier today, “If any part of the employment report misses, the market will rush to downgrade its expectations for June tightening. Between the softness in U.S. data and the slowdown in China, the case for tightening is weakening. Yesterday’s Beige Book report was not overwhelmingly optimistic with some Fed districts noting that the optimism has waned. We believe the Fed will raise interest rates this month but recent developments cast doubt on the odds for additional tightening.”

So any disappointment in tomorrow’s NFP report could quickly turn to a selloff in USDJPY which could take it towards the key target of 110.00 as short press their case.

EURUSD – 1.1000 and French Election in View

EURUSD – 1.1000 and French Election in View

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The EURUSD powered its way to fresh multi-month highs breaking above the 1.0950 level and rising all the way to 1.0985. The pair is within the striking distance of the key 1.1000 figure that it hasn’t seen since last year and could break it in Asia session trade.

Over the next 72 hours, however, the pair faces two very important event risks. Tomorrow’s NFPs and Sunday night’s French election results. Both could prove beneficial to the pair and seal its rise above the 1.1000 level. If the NFPs prove soft, especially on the wage front, the nearly universal assumption that the Fed will hike rates will come under doubt and yield differentials between Treasuries and Bunds could compress sending euro higher.

Then on Sunday, a solid Macron win would ensure the status of EU and will create another wave of relief buying in the pair. There is a risk that much of the good news has been priced in, and the EURUSD could see a sell the news dynamic later on the week, but for now all roads lead to the 1.1000 figure as sentiment looks solidly euro bullish.

USDJPY – Will 110.00 Hold?

USDJPY – Will 110.00 Hold?

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Tomorrow the market will finally get the long-awaited US labor data starting with ADP report and then the ISM Non-Manufacturing release which often serves as a good barometer of the Non-Farm payrolls due at the end of the week.

In Q1 the US data has slowed, as sentiment has climbed to record highs, but actual consumer spending has been subdued. That’s the reason why US bond yields have declined and the dollar rally has stalled. The market will be looking for concrete evidence that US growth continues to maintain its pace. Otherwise, any miss in the data could send USDJPY tumbling.

The pair has survived three attempts at testing the 110.00 figure. So far support has held. However, the short will redouble their efforts if the news disappoints and the pair is likely to tumble through the key 110.00 support level.

USD/JPY – Can it Clear 110.00?

USD/JPY – Can it Clear 110.00?

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For the past week USD/JPY has had trouble with the 110.00 level. It has mounted that figure more than several times but has not been away to pull away and has barely broken 110.50 only once to pull back once again. 110.00 was the key breakdown level so it only seems natural that the pair will find some resistance there but for the uptrend to continue it needs a conclusive break through 111.00.

Tomorrow’s US GDP figures may provide some support if they print hotter than forecast The market is already expecting a bump to 2.1% from 1.9% on the initial reading, but the true test of the buck may not come until next week when we see the NFP report. If the labor data proves positive chance of a June Fed hike will rise markedly and will help fuel the breakout the bulls are looking for.

EURUSD – 1.1000 in View?

EURUSD – 1.1000 in View?

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EUR/USD has been sliding ever since the hawkish FOMC minutes last week and today it hit an 11 week low breaking below the 1.1150 barrier. The pair is starting to finally feel the pain of interest rate differentials as the Fed look clearly to tighten while the ECB will remain stationary for the foreseeable future.

Tomorrow the market will get a glimpse at the IFO survey data and given the fact both flash PMIs and ZEW survey have missed their mark the IFO is likely to disappoint and could push EUR/USD to a test of the key 1.1100 support. A break there could open a up run towards the psychologically key 1.1000 level as the euro long continue to unwind their positions.

EUR/USD – Back to 1.1000?

EUR/USD – Back to 1.1000?

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Fundamentals
A combination of a sell off in the dollar ( led primarily by rebound in oil ) and a coming of terms between Greece and Eurogroup has resulted in a massive EUR/USD rally that recovered four days worth of losses in just one session. The agreement between Greece and EG -- if it happens will definitely relieve some of the pressure on the pair. However, the euro has much bigger problems to worry about. The latest economic data from the PMI’s has shown that the region is taking a step back. If tomorrow’s IFO survey also shows a deterioration of conditions today’s rally may be one day wonder.

Technicals
Technicals for the pair look relatively sound with the euro making a higher low at 1.0600 level. For now however the 1.1000 looks to be formidable resistance, so any push higher should be limited in scope.