Little to drive the USD other than the data from last week, but we saw JPY buying dominating trade on Monday, with USD/JPY weakness driven by the miss on US average earnings on the face of it. However, EUR/USD losses suggest intra-day traders were pushing to test limits, and once again we ran into some demand ahead of 1.0700. For USD/JPY, the market pushed lower and 111.99 traded as the prospect of stop loss selling through the figure promised some momentum. This failed to materialise, but with UST yields edging lower, we expect the pressure on lower levels to continue in the near term.
Looking ahead, AUD and NZD – more so the former – are trading narrow ranges with central bank risk to negotiate through the week. The RBA overnight is expected to maintain a cautious stance with rates on hold for the ‘foreseeable’, but their commentary on the mix of data releases will make for a potentially volatile session due to inflation softness alongside the strong trade numbers. The RBNZ is on Thursday, but NZD/USD staying in touch with the 0.7300’s, having topped out at 0.7350 just ahead of the jobs report (unemployment rate rose to 5.2%).
For GBP, the run up to triggering Article 50 will contain the upside to a larger degree, but with the market net short, fresh aggressive positioning on the downside has abated. Even so, cable may well drift lower towards 1.2300-50 initially, with the USD side of the equation just as dependant on whether we go through 1.2000 again. EUR/GBP is in buoyant mood also, with the shallow dip under 0.8600 having met with healthy demand through today.
We are due to hear from the Fed’s Harker later on in the session today, but looking to Tuesday, beyond the RBA meeting, we have German industrial production, Canadian and US trade as well as Canadian Ivey PMIs all stand out. Canadian jobs at the end of the week worth keeping in mind, with USD/CAD back above the 1.3100 level in the meantime.