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USD/JPY - 95.00 Ahead?

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Top Stories

  • Barroso assures the market Germans will pass the Greek bailout deal
  • UK election - Tories take the lead
  • Asia up 1.2%, Europe up .4% as risk appetite returns
  • OIl all the way back to $86/bbl
  • Gold hitting new highs at $1174/oz.

Overnight Eco

  • AUD HIA New Home Sales 0.9% vs. -5.2%
  • AUD Private Sector Credit
  • JPY Manufacturing PMI 53.5 vs. 52.4
  • JPY Household Spending 4.4% vs. 0.7%
  • JPY Tokyo Core CPI -1.9% vs .-2.0%
  • JPY Unemployment Rate 5.0% vs. -4.9%
  • JPY Prelim Industrial Production 0.3% vs. 0.9%
  • JPY BoJ Rate Decision 10bp
  • EUR Unemployment Rate 10.0%

Event Risk on Tap

  • CAD GDP expected at 0.5%
  • CAD RMPI expected at 0.6%
  • CAD IPPI expected at 0.3%
  • USD Advance GDP expected at 3.4%
  • USD Employment Cost Index expected at 0.6%
  • USD Chicago PMI expected at 60.2
  • USD Revised UoM Consumer Sentiment expected at 71.3

Price Action

  • USD/JPY rallies to 93.25 as risk flow return and BOJ remains still
  • AUD/USD good housing data push it above .9300
  • GBP/USD just below 1.5400 as market grapples with election news
  • EUR/USD short covering continues as 1.3300 taken out to the upside

Risk FX continued its short covering rally on the last trading day of the week as European officials assured the markets that the Greek bailout deal would be completed shortly. Jose Barroso the European Commission President said that he was confident the rescue package would be ready "in days." As the result, EUR/USD rallied through the 1.3300 barrier in early morning European dealing.

As we wrote yesterday, "With the unit now grossly oversold and eco data supportive some light short covering could push it back above 1.3300 before the week's end." Having reached the target the euro may now find some resistance around the 1.3400 level but with the Greek crisis under control for the time being, the single currency has lost much of its downside momentum and may spend the next several weeks consolidating at these levels unless currency traders see further turmoil in the credit markets.

There were no surprises on the economic front with European unemployment printing at 10% as expected while CPI reading rose to 1.5% - the highest level in nearly two years. Still the data had little impact on the market and many analysts argue that as a result of the massive rescue package for Greece, the ECB will have to maintain a loose monetary policy irrespective of any price pressures in the region. That factor could weigh negatively on the euro late into the year if the Fed begins to tighten while Mr. Trichet and company are forced to remain stationary. For now however, the unit was befitting from the easing or risk aversion sentiment and appears to have stabilized at these levels.

In UK, the focus will turn to politics as the election campaign enters its final days. The strong performance of Tory leader David Cameron in last night's final televised debate has turned the markets more optimistic about the prospect of a Tory win. Even if Mr. Cameron is forced to form a coalition government, Mr. Glegg has indicated that he would be open to the idea of sharing power with the Tories, thus lessening the chances of protracted political battle and a hung Parliament.

The pound may rally to the 1.5500 level if polling continues to favor Tories as campaigning enters its final days. Still as we noted earlier, "the euphoria over the pro-business Tories will last only as long UK economic data continues to surprise to the upside. Any slowdown in growth will revive concerns over the country's extremely fragile fiscal condition and could trigger the type turmoil that we are seeing in European credit markets."

In North America today the market could see conflicting US economic data with GDP missing slightly to the downside but the Chicago PMI possibly beating its forecast. Overall US economic data continues to show steady improvement and that fact is being reflected in USD/JPY which has held the 94.00 level for the past several days and has burst through 94.40 resistance in overnight trade. With BOJ officials stating that the Japanese monetary will continue to remain stationary and with Japanese economic data overnight relatively mixed, the 3 month LIBOR spread between US and Japanese rates continues to widen out which is indicative of further upside in USD/JPY as 95.00 now comes into view

FX Upcoming

Currency GMT EST Release Expected Prior
CAD 12:30 8:30 CAD GDP 0.5% 0.6%
CAD 12:30 8:30 CAD RMPI 0.6% 0.4%
CAD 12:30 8:30 CAD IPPI 0.3% 0.0%
USD 12:30 8:30 USD Advance GDP 3.4% 5.6%
USD 12:30 8:30 USD Employment Cost Index 0.6% 0.5%
USD 13:45 9:45 USD Chicago PMI 60.2 58.8
USD 13:55 9:55 USD Revised UoM Consumer Sentiment 71.3 69.5

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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