EUR strength returned to the market and the brief period of consolidation in the EUR crosses looks like it might be over almost before it began. The Yen was again the weakest of the majors, which surprises me somewhat given that we still haven’t seen any real action or deadlines from the BOJ, and the market is still quite short of Yen.
The main risk event today will be the BOJ meeting minutes. The market ignored poor EZ data out of Spain and France and concentrated on strong German PMI instead, and the disappointing Applerevenue forecast has also been forgotten already. This is a market set on buying EUR and selling JPY, regardless of what’s going on so there’s little point in getting in the way.
EUR/USD dipped below 1.3300 in early European trade on the back of poor Spanish jobs data and equally poor French PMI. The buyers weren’t dissuaded and heavy bids below 1.3280 were not really tested. Strong German PMI caused an immediate reverse. Short-term range between 1.3250/1.3400 is still intact (see chart) but buying dips is definitely preferred whilst the markets needs to buy EUR.
EUR/JPY is trading towards the upper end of a bullish channel near 121.00 (see chart) but I cannot get carried away here on the bull train whilst the BOJ have no fixed timelines and the market remains short of JPY.
USD/JPY has broken above recent highs at 90.20 and seems determined to move higher. Optionality is reported at 90.50 and again at 91.00 and that should prove both magnetic and hard to breach.
The AUD fell pretty hard against the EUR and is testing support levels against the USD. Sovereign and asset manager bids are reported between 1.0430/50.
Cable is set to close below 1.5800, and given the strength on EUR/GBP, this is yet another bearish sign for the pound. The main flows here are in the cross with big investment funds exiting asset plays and hedge funds exiting strategic positions.
Good luck today and TGIF.