Saxo Bank | Apr 09, 2013 06:53AM ET
USD/JPY shied away from its first go at the psychologically important 100, where options barriers and the like probably abound. Meanwhile, GBP/USD is back to a key support area important for near-term trading scenarios.
More Than Just A Day
The market may get a bit more cautious from here in the short term on the JPY trade, wondering when traders have become over-positioned in the near term and -- especially -- when official rhetorical intervention will begin to make is presence felt. Europe and Germany in particular are likely to begin to complain more loudly if EUR/JPY exceeds 130, and possibly even I it doesn’t. And I suspect China is preparing a comprehensive response to the situation -- one it will be ready to mobilize in the coming months with little notice -- if/when it feels that the Yen weakening is damaging its own economic prospects. As I have said before, this JPY weakening move will not remain a one-way street.
Overnight, the USD was weak as it seems to have dipped back into risk-on/risk-off mode after the recent string of weak U.S. data. U.S. stock indices were back within striking distance of recent highs and Asian markets were also buoyant. China’s low CPI number was likely cause for some relief in Asia as well. The 2.1% YoY rate of inflation is not far from last year’s lows below 2.0%. Producer prices have been negative since early last year. Is this a sign of weak demand?
GBP/USD consolidated a bit yesterday after two days of squeezing higher on the heels of the BoE meeting and the weak U.S. employment figures. The sell-off has taken the pair back to the 1.5250/70 zone of support that was key overhead resistance previously. The action will likely take its cue from the UK production figures up this morning. A significant move back into the lower zone possibly sets up a test of the multi-year lows, while a survival of support for now could see the pair realizing the full potential of the corrective pattern around 1.5470. In general, it’s still about picking entry points for fresh shorts.
Looking Ahead
The calendar is heavily populated today, but there are few major data points of note -- note the group of Fed speakers out later today. Those with time on their hands should also note that the Boston Fed is hosting a conference on April 12-13 at which the theme will be “Fulfilling the full employment mandate”. Noted doves Rosengren of the Boston Fed and Evans of the Chicago Fed. Other attendees include former outspoken BoE dove Blanchflower and a Riksbank deputy governor. We can look here for the kinds of blueprints that may be in place in the event the Fed dovish contingent stays in power and the US recovery fails to blossom from here.
Economic Data Highlights
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