The biggest standout in this market is the strength of the JPY and the weakness of the EUR, as the USD picture remains mixed. USDJPY has dropped again as well, but remains above recent lows, while EURJPY is carving out new territory below 137.50 despite relatively strong risk appetite. As I have shouted from every high spot I can find lately, let’s imagine where these JPY crosses would be if we got a chunkier 6-8 percent sell-off in global equities.
EURJPY
We are now free of those range lows, with only the 2014 lows near 136.20 separating us from the weekly Ichimoku cloud (not shown below) bottom toward 132.20. Resistance comes in now at 137.50/75. The red circles indicate that every recent new low failed to trigger immediate further momentum. Let’s see if this time is any different.
We did get some risk-off overnight on a significant announcement overnight from the US, which announced sanctions against Russia, including the banning of any US citizen to deal in financial instruments related to specific, large Russian companies and banks. It is clear that a full-scale financial confrontation – if not war – is the new geopolitical battleground and should make investors nervous for the longer term risk appetite picture, not to mention the potential for disruption of global markets. Yellen’s testimony yesterday and second round of question-and-answer with US lawmakers garnered no headlines of note or significant market reactions, as risk appetite preferred to focus on the monster bid by Murdoch’s empire with Time Warner. Is this the kind of deal that defines the top of this free-liquidity bubble era? It's tempting to believe so. Stay tuned for rear-view mirror thoughts on that idea a few months from now. Looking ahead
Today’s Eurozone June CPI data release is the follow-up on the more important initial release from the end of June this month, though there is certainly reaction potential if the month-on-month figure deviates significantly from expectations (the original late June estimate is year-on-year only for headline and core – today’s release includes final revisions for those numbers in addition to a month-on-month reading). Later we have the US housing starts and building permits data, as we look for whether housing can rebuild any of its former momentum. The NAHB survey yesterday suggests strength.
It is somewhat disappointing for the USD bulls that Federal Reserve Bank chair Janet Yellen’s testimony over the last couple of days failed to trigger a larger reaction in the forward anticipation of Fed moves. So the USD may continue to trade passively in the middle of the pack as the focus is on EUR and JPY at the moment. Still, I’m looking for whether GBPUSD is overextended and wonder if AUDUSD can maintain the range above 0.9320 – I suspect AUDNZD buying has kept AUD more supported than it otherwise would have been. As well, let’s see if USDCAD support comes in quickly ahead of 1.0700 – there was nothing in yesterday’s Bank of Canada statement that encourages downside potential.
Economic Data Highlights- New Zealand Jul. ANZ Consumer Confidence out at 132.7 vs. 131.9 in Jun.
- Australia Q2 NAB Business Confidence out at 6 vs. 7 in Q1
- UK BoE’s Cunliffe to Speak (0745)
- Euro Zone Jun. CPI – month-on-month and revisions of previous YoY estimate (0900)
- Canada May International Securities Transactions (1230)
- US Weekly Initial Jobless Claims (1230)
- US Jun. Housing Starts and Building Permits (1230)
- US Weekly Bloomberg Consumer Comfort Survey (1345)
- US Jul. Philadelphia Fed Survey (1400)
- US Fed’s Bullard to Speak (1735)