Another fairly quiet night with adjustments on the crosses still the main feature. EUR/USD is exactly where it was yesterday morning but both the JPY and the AUD have weakened slightly. USD/JPY rose on better than expected US retail sales data, which at first glance would seem to lessen the chances of further QE and the market will be paying closer attention to tonight’s US CPI data for further clues. The AUD is heavily overbought and continues to ease lower across the board. The economic calendar is quite bare with only Australian consumer sentiment and Chinese FDI due.
EUR/USD is sitting right on nice short-term support at 1.2320 (see attached chart) and if these levels hold then we may be in for another strong bounce. It seems I’m not the only one looking at this nice bottoming pattern as interbank dealers report plentiful stop-loss orders below 1.2300 which may get targeted in the twilight zone. EUR/JPY will be the main driver during Asian trade but it is stuck mid-range and needs to break above 97.80 in order to generate fresh momentum.
The strong US retail sales data reduced the possibility of further Fed easing and this affected USD/JPY most, due to this pair’s strong correlation with US interest rates. Corporate offers are still very heavy through 79.00 but stop-loss orders are reported above 79.15. Buying dips back towards the semi-official bids at 78.00 remains the preferred strategy here but I will avoid buying breaks until all of the Yen crosses turn around as well.
AUD/USD has stayed heavy and decent-sized bids near 1.0500 have now been filled. Next support lies at 1.0440. EUR/AUD tested the 1.1770 neckline but hasn’t broken yet, and this pair remains key to the Aussie’s immediate future. Any comments from Chinese officials regarding their RRR will induce short-term volatility.
Overall interest remains very muted and we can expect these conditions to remain for another 2 weeks.
Good luck today.