Daily Observations: June 12, 2013
Typical Time Frame: 1-day to 1-week
Last week I said: "Overall, the moves...this week aren't USD-centric - they're about exogenous forces that haven't had their turn in the limelight. I'm not a US Dollar bear, but I'm not looking long right now either. I'd be more interested after the ECB meeting on Thursday, but not before then." The ECB meeting last Thursday was brutal for the US Dollar, as it helped spur on the tumultuous tumble against the Yen (which subsequently knocked around all the other USD-based pairs).
Although NFPs beat on Friday, the BoJ's hold on Tuesday was far more important to market sentiment. First, NFPs were barely a beat, and the below trend headline figure isn't exactly going to make Fed policymakers rush to exit QE3. (The 3-month, 6-month, and 12-month averages all dropped as a result of the print.) I'm not anticipating a reduction in QE3 next week, thus, I implicitly must be expected US Treasuries to rally, pushing yields lower and undercutting the US Dollar. Second, and as mentioned earlier, the BoJ's hold shows that they're content with 'Abenomics' and that no new measures should be expected - and any short-term liquidity measures would more-or-less amount to a Japanese-styled LTRO (of the ECB in December 2011 and February 2012).
This factors culminate in the perfect storm for a USDJPY pullback, which we've seen - I expect the Yen to stay firm until the Fed policy meeting next Wednesday.
In terms of what I'm looking at right now, please check this EURJPY chart and this USDJPY chart - both have severely bearish technical implications. Also, I'm watching this EURUSD Head & Shoulders and have started to nitpick at a short position - nothing major or conclusive yet however.
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--- Written by Christopher Vecchio, Currency Analyst
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