G10 trading ranged, GBP quiet before production data

Market Brief

USD/JPY and JPY crosses traded mixed in Tokyo despite wider current account surplus printed in May (522.8bn yen vs. 417.5bn expected & 187.4bn last). The Japanese trade deficit narrowed from 780.4bn yen to 675.9bn yen, however the Japanese exports remain at levels below December 2012, when Abe became PM and triggered the heavy yen depreciation. Yen lost roughly 15% since January 2013. After hitting 102.27 post-NFPs, USD/JPY retreated to 101.69 overnight. Bids came in charge below 102.82 (200-dma) to cap the downside. Trend and momentum indicators are flat pre-Fed minutes (Wed). EUR/JPY traded in the tight range of 138.38/138.63 around its 21-dma (138.58). The key resistance remains at 200-dma (139.27). The overnight JPY rise is also suspected to be due to safe-haven flows on Typhoon Neoguri. Nansei Sekiyu announced to stop refining until improvement in weather conditions and confirmed operational security.

In Australia, NAB’s business conditions and confidence improved in June. AUD/USD formed a double top at 0.9396 in Sydney. Given the marginally bearish technicals, the first line of resistance should enter the game at the 21-dma (0.9400), the key short-tern resistance stands at 0.9505 (July 1st & 2014 high). On the downside, support is eyed at 0.9339/44 region (Fib 38.2% projection on Oct’13 – Jan’14 drop & 50-dma). AUD/NZD remains offered as technicals continue giving fresh short signals. The 21-dma (1.0792) is below the 50-dma (1.0824) and currently tests the 100-dma (1.0784) on the downside.

EUR/USD trades directionless and stuck in the tight range of 1.3576/1.3610 since the week opened. The decline in German current account balance, seasonally adjusted exports (-1.1%) and imports (-3.4%) weighed on EUR/USD as soon as Europe walked in this morning. The bias is marginally on the downside due to smooth combination of dovish ECB and good jobs data in US. No surprise is expected from Fed minutes on Wednesday, yet the USD leg will be decisive in EUR/USD direction walking towards the release. The key support zone stands at 1.3477/1.3503 (2014 low/June 5th ECB reaction low), the critical resistance stands at the 200-dma (1.3677).

In UK, the pound trades in wait-and-see mode before industrial and manufacturing production data (due at 08:30). We suspect a formation of top in GBP/USD, any negative surprise should trigger corrective shorts. Daily support is seen at 1.7023/63 (21-dma/former high), resistance should come into play at 1.7250 (30-day upper BB), 1.7300/32 (year-to-date uptrend channel top/50% retracement of the 2008 decline).

In Toronto yesterday, USD/CAD hit 1.0633 as building permits surged 13.8% in May (vs. 2.0% expected and 1.1% a month before). The intraday gains were quickly erased after the business outlook for future sales and the BoC senior loan officer survey showed softer-than-expected results in 2Q. Failure to break below 1.0600/20 suggests the formation of a short-term base. Key local support stands at 1.0621 (last week low). Canada will release June labor data on July 11th (Fri). The overall bias remains CAD-positive; however the weakening bullish momentum suggests a positive corrective phase before jobs data. The key trade band is seen delimited at 1.0550/1.0800 (December transition zone).

Today traders watch German May Trade Balance, Exports & Imports SA m/m, Bank of France June Business Sentiment and French May Budget Balance ytd, Swiss June CPI m/m & y/y, and May Retail Sales Real y/y, UK May Industrial and Manufacturing Production, US June NFIB Small Business Optimism,, US May JOLTS Job Openings and Consumer Credit and UK June NIESR GDP Estimate.