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USD: Durable goods data is always a bit of a roller-coaster and coming on a Friday, could inspire more volatility than usual in FX ahead of the weekend, with London also closed on Monday for a Bank Holiday.   After a 6.9% fall last month, the expectation is for a gain of 1.9% this month.

EUR: The German Ifo release is one of the more important ones of the monthly calendar. The headline index has fallen for the past two months and the market expects a steady outcome at 104.4 for the May release.   A weaker number would undermine the euro, which has held up relatively well, given the generally firmer dollar environment seen through this week. Update: The score is 105.7, above expectations, EUR/USD rallies.

Idea of the Day

In the early part of the yen depreciation story towards the end of last year, USDJPY and the stock market moved very much in tandem and it was more the yen that was driving the stock market, as firms anticipated better export prospects as a result.

Now, despite yesterday’s moves, there is a strong detachment. The Nikkei fell 8%, with a small bounce being seen today.   Whilst the yen remains weaker, it is in the middle of the range traded yesterday and is currently less than 2% away from yesterday’s high on USDJPY.

In other words, the stock market was in the driving seat, but the yen was comparatively restrained in terms of the extent to which it followed. In sum, the appetite to short the yen remains fairly strong.

Latest FX News

JPY:  A 1.5% range on USDJPY on Thursday, with the decline in the Nikkei the initial catalyst to the yen strength, taking out stops down to the 101 level.   Whilst the Nikkei is up around 1%,   USDJPY has retraced 50% of yesterday’s trading range, reflecting the fact that the yen is further detaching itself from events on the stock markets.

NZD:  Weak trade data overnight, with the headline balance at 157 mln, vs. expectations of a 515 mln outturn.   The kiwi was weaker as a result, but currently not threatening yesterday’s low at 0.8006 (lowest for 8 months).

AUD: The Aussie has been battered around this week, AUDUSD having traded a 2.5% range, but the volatility largely coming from the dollar and the fact that further long positions have been stopped out on the Aussie. Overnight saw more weakness.   2012 low of 0.9582 remains the key downside focus.

EUR: German GDP data showing an unrevised rise of 0.1% for the first quarter. In comparison, the euro continues to hold up well in comparison to the volatility being seen on the dollar and the yen.   EURUSD starts the week near to the 1.2950 area.

Further reading:  EURUSD: Downtrend Continuation to 1.2700-Elliott Wave