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FX Trading Flat Ahead Of Thursday's Risk Events

Published 06/07/2017, 12:15 AM
Updated 03/05/2019, 07:15 AM

A relatively quiet APAC morning session tracking towards “ Super Thursday” as traders remain in deft mode ahead of the main risk events.

Reports that China is ready to buy more US Treasuries has driven US Treasury yields lower, providing additional fodder to the sagging US dollar narrative.

Given the enormity of the risk events ahead, currency prognostication is more or less a carnival sideshow at this stage. Certainly, traders will reduce exposures on both sides of the coin as the risk / reward ratio becomes little more than a coin flip across the board.

Euro

The stage is set, but trade remains uninspiring regarding the euro. The market is positioned for a shift in ECB forward guidance, so the tail risk is for a steady-as-you-go from Draghi.

British Pound

GBP ignores data but continues to trade constructively heading into the election. Price action would suggest the market is leaning for a Tory majority.

Australian Dollar

AUD momentum continues to build from last week’s spell of bearishness. Given market positioning skewed short, I suspect the clean break of .7500 had near-term shorts running for cover. GDP came out on the consensus button. But despite the happy mood on the Aussie desk this morning, lingering concerns about inflation and wage growth will likely temper the tone. Sellers are looking to re-enter shorts against the technical backdrop, however, price action suggests that dealers are content to let the event risk dust settle before re-engaging any dollar longs.

Japanese Yen

Offers dominated directional flow overnight, but volumes remain tepid. Certainly, the greenback is getting little support from US yields which plays into the risk aversion scenario on the USDJPY. Exporter flow continues to weigh on the back of dealers' minds as a break below the 109.00 level could see a rush to hedge dollar risk and could potentially drive the USDJPY to the low 108.00 level.

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Local Asia FX

Ahead today we have the RBI – only 1 of 39 BBG economists predicting a rate cut this time around – though the market is pricing in a cut in upcoming months so market focus is on a shift to dovish guidance.

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