Although the moves haven’t been severe at this point, they are certainly getting the attention of investors who are seeing Eur/Chf break to yet another record low below 1.3000 and Usd/Jpy just off of its multi-year lows. Any forms of verbal intervention efforts on behalf of Japanese officials are now being ignored and the markets have reverted to a buy the Yen until proven otherwise mentality. This same logic holds true with the Swissie, which has also continued to appreciate over the past several months despite official intervention efforts by the Swiss central bank. More recently, the SNB announced that it would be pulling back from intervention and did not see any serious or concerning threats to deflation, and this has helped to accelerate gains in the Swiss Franc. Nevertheless, we would be extremely wary of adding to Yen and Swissie longs at current levels as it seems things could be coming to a head real soon. In fact, we will be looking for opportunities to sell Yen and Swissie on overextended intraday moves.
Elsewhere, the Australian Dollar has been an outperformer on the day thus far, with a round of solid data highlighted by stronger retail sales and building approvals, managing to somewhat offset the broader wave of risk selling in the currency. The New Zealand Dollar hasn’t been as lucky as its antipodean cousin, with the currency coming under added pressure on the news that South Canterbury had gone into receivership. Meanwhile, Sterling trades relatively unchanged following the UK bank holiday and was unmoved after a better than expected consumer confidence reading. Although the Euro has come back under a bit of pressure in Asia, the key level to watch comes in by 1.2585, and a break will be required to officially open the next downside extension.
Looking ahead, the Swiss UBS consumption indicator is due at 6:00GMT, followed by German unemployment (7.6% expected) at 7:55GMT. UK mortgage approvals (46.5k expected), M4 money supply, net consumer credit (0.0B expected), and net lending on dwellings (0.7B expected) are all due out at 8:30GMT, with the Eurozone CPI estimate (1.6% expected) and unemployment rate (10.0% expected) capping things off at 9:00GMT. US equity futures and gold prices are slightly lower, while oil has been hit harder and trades down by some 1% on the day.
Written by Joel Kruger
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