Dollar Sells off Hard in Asia – Trump Worries?

Market Drivers January 10, 2017
Dollar sell off hard in Asia
AU Retail Sales miss
Nikkei -0.79% Dax -.20%
Oil $52/bbl
Gold $1184/oz.

Europe and Asia:
AUD AU Retail Sales 0.2% vs. 0.4%
CNY CPI 2.2% vs. 2.3%

North America:
CAD Housing Starts 8:30

Dollar came under very heavy selling pressure in early morning Asia trade with USD/JPY dropping to within 20 pips of the 115.00 figure before finding some support and finally rebounding towards the 116.00 mark by morning European dealing.

There was no news in the market and the move appeared to be an extension of profit taking that started in North America yesterday as US yields pulled back from their post NFP highs. The US benchmark 10 year bond yield remains subdued at 2..37% – well below the 2.5% set right after Friday’s payrolls report.

Some traders speculated that the market may have seen some position squaring ahead of Donald Trump’s first official press conference on Wednesday though it’s unlikely the presser will create any news as Mr. Trump will likely hold back on any details in policy for the time being. Still, the corrective move in dollar appears to be more than just a two day affair. As we noted before USD/JPY has not made fresh highs in more than a month and the price action in the pair which is largely governed by US yields indicates that some of the euphoria is wearing off and the market will now want to see hard concrete data on growth before taking the buck higher.

Elsewhere, the calendar remains essentially barren with only Australian Retail Sales in Asia trade which missed their mark at 0.2% eyed versus 0.4% forecast. Overall sales are up 3.4% on a year over year basis and though lower than forecast, suggest that consumer demand remains relatively stable. The Aussie dipped but then recovered in post news trade and continues to trade relatively well on anti-dollar flows with .7400 squarely in view.

In UK the BRC like for like sales rose 1.0% from 0.6% the period prior as consumer demand remains relatively healthy, but cable remains plagued by concerns over a hard Brexit and continued to be a laggard in overnight trade. The pair is still within striking distance of the 1.2100 and could test that level on any rebound in the buck during the day.

With no data on the docket, flows will once again be driven by yields. If US yields continue to selloff dropping towards 2.35% on the 10 year, USD/JPY could once again drift towards the 115.00 figure and this time the stops could give way.