EUR/USD
During Asia-Pacific trade the pair was subjected to further downside as participants continued to speculate over what action if any ECB’s Draghi will take at next week’s ECB meeting, with the possibility of a QE programme still a hot topic. This subsequently saw the pair slip below yesterday’s lows of 1.3165, with Deutsche Bank the latest tier 1 bank anticipating an unveiling of an ABS programme next week. However, the downside momentum was later halted after EUR/USD ran into bids ahead of a touted barrier at 1.3150. Price action was then reversed as the Dollar Index index pulled away from its 11-month highs amid profit taking ahead of month-end. This move to the upside was then exacerbated by ECB source comments that said ECB action next week is unlikely without an inflation slump, which saw the EUR/USD briefly reclaim the 1.3200 handle with the upside capped by Asian offers at this level. However, the comments went on to say that if we get the EUR/USD under 1.30 it will help boost the Eurozone economy. Looking ahead, attention now turns towards the German jobs and inflation report, thus presenting participants with further insight into the fragility of the German economy.
USD/CAD
The USD/CAD was seen lower throughout the session amid M&A and technical flows as the USD index pulled back from its 11-month highs. This subsequently saw USD/CAD test its 200DMA to the downside at 1.0885 and its lower Bollinger band at 1.0880/85. In terms of the downside, analysts at IFR reported European real money names selling USD/CAD below 1.0900 and an option expiry at 1.0900 of USD 325mln. Furthermore, CAD strengthened overnight across the board after RANsquawk sources reported heavy selling in the EUR/CAD, from 1.0956-1.0912, which was later attributed to a French account, with month-end flows also said to have been observed. Additionally, on the corporate front, yesterday saw news that Burger King is to acquire Tim Hortons for CAD 12.5bln. Looking ahead for the pair, focus for the week on the data front will likely be placed on Friday’s Canadian GDP reading with the M/M reading expected at 0.2% vs. Prev. 0.4%.
USD/JPY
Overnight the turnaround in the USD index filtered through to the pair as the USD/JPY broke back below the 104.00 handle. In terms of economic commentary from Japan, the European session saw some comments from an adviser to PM Abe who said that raising the sales tax in 1% point increments is an option and Japan should drastically cut corporate tax rate to around 25% to attract investment. Furthermore, analysts at ScotiaBank ScotiaBank noted that JPY is higher today on early rumours that next consumption tax hike will be in stages and Japan Post said it will not make drastic asset class shift. Thereafter, the pair continued its decline as the move higher in USTs saw the pair sent lower amid unfavourable interest differential flows. Looking ahead, tomorrow sees an absence of tier 1 data, therefore attention for the pair may reside stateside with the release of USD GDP, pending home sales and weekly jobs data.