Old Government mantra forces JPY selling

EUR USD (1.2710)
The European trading day on Wednesday saw the single currency slowly making its way to the downside. It is likely that some stops were triggered which even saw it hitting a 1.2675 low before recovering back to the current levels in the FE this morning.

Apart from the US trade deficit having been the only significant item on the agenda, yesterday was yet again a thin day as far as economic data releases were concerned. On the announcement of the trade gap the single currency was already on its way lower, and the narrower-than-expected deficit just provided some market participants, who had in any event decided to sell the euro, with an argument to do so. Even though the figure was better than the expectation, it still widened and raised eyebrows in some corners. In this respect it is also worth mentioning that forecasts also act as an anchor value in the market place. This then runs the danger that traders could attach too much value to it and in the end the predicted number stands a chance to even overshadow the actual one. Nevertheless, with long-term demand for the euro being a readily available argument, the first sign of a recovery was immediately ascribed to a ‘supranational name’ being on the bid. However, it could very well be that medium-term traders* are actually scooping up some euros at the current levels.

Yesterday’s dip down to 1.2690 allowed us to enter into a bullish strategy with the objective set at 1.2930/40. As already mentioned, the risk-limit must be kept tight at 1.2660, which also marks the last good near-term support on the way down.

USD JPY (115.45)
As traders were taking profits on their long yen positions, it dawned on them that the rate hike could be less than 25bp. However, this idea has already been in the market for most of the week and some analysts even argued that a hike less than 25bp might raise questions about the extent of the Japanese economic recovery. Another piece of old news that sounded plausible to sell the yen on, was the Japanese Finance Minister, who again questioned the deflation situation and reiterated the view that it could be too early to end zero interest rates. Nevertheless, the break beyond 115.30 provided the dollar with some additional buoyancy and it should now be on its way to the upper border of the previous consolidation between 113.45 and 116.70. Beyond there, the recovery should even continue more rapidly towards 118.50. Supports are visible at 114.70 and 114.20. The first mentioned point also marks the tight limit within the positive orientation.

EUR JPY (146.80)
The euro showed even a stronger recovery yesterday from its recent 145.00 trough and is still fighting with our 146.70/75 resistance. Once this hurdle is cleared, we can expect another push to fresh highs at 147.90 or even to as high as 148.80. To the downside, we now count on improved supports at 145.95 and thereafter at 144.70/80.

EUR GBP (0.6930)
The cross tested our initial support at 0.6895 and recovered subsequently to the current levels again. We expect to run into additional demand in the 0.6845/60 zone, where we would opt for a bullish strategy with a tight limit below. For today, supply is lurking at 0.6945 and 0.6980.

GBP USD (1.8350)
Sterling slipped and with the UK unemployment figure at the highest level since 2002, this served as a plausible reason to encourage dollar buying. For the time being, Cable remains in a neutral and stable position, but we still need a break of 1.8575/80 to signal another immediate upward attempt. Overhead, we reckon with intermediate resistance at 1.8450. To the downside, we expect supports to be left at 1.8250, which also marks the last good demand point ahead of 1.8150.

AUD USD (0.7540)
The current objective remains 0.7595. Particularly strong jobs data from Australia, which was even described as a ‘monster’ just further forced traders to jump in and cover the AUD. Beyond the objective, we already reckon with the second target at 0.7650. For today, we tighten the risk limit of our positive orientation to 0.7500.