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USD/JPY Tumbles After Weaker Philly Fed but so do AUD/USD and EUR/USD

USD/JPY Tumbles After Weaker Philly Fed but so do AUD/USD and EUR/USD

2013-08-15 14:38:00
Christopher Vecchio, CFA, Senior Strategist
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THE TAKEAWAY: Perhaps best gauge of broader US economy health, Philly Fed Index misses estimates > NAHB housing gauge rises but only after last month falls > Mixed view of the economy offsetting optimism from earlier today > AUDUSD, EURUSD, USDJPY BEARISH

The earlier optimism gained about the US economy has been displaced after a batch of secondary, but nevertheless disappointing data. While one report was neutral, the more important of the two secondary pieces fell well-short of forecasts, stoking risk-aversion swiftly after the start of equity trading in New York.

With the earlier data of the more important variety according to the Fed – the weekly claims figure and the monthly inflation reading both directly address the Fed’s QE3 circuit breakers – the weak Philadelphia Fed Index, widely viewed as a strong proxy for US growth, has provoked more intense selling in US equity markets. Here are the figures:

- Philadelphia Fed Index (AUG): 9.3 versus 15.0 expected, from 19.8

- NAHB Housing Market Index (AUG): 59 versus 57 expected, from 56 (revised lower from 57)

Thus, if the Fed sees sufficient reason to wind down QE3 amidst weaker growth prospects, then the current atmosphere is playing out as it should: stocks fall; Treasuries rebound slightly on the ‘safety’ bid; and the US Dollar holds up moderately well but for against the Japanese Yen.

Read more: USD/JPY Surges as US 10-year Yield Breaks Out on Strong CPI, Claims Data

USDJPY 1-minute Chart: August 15, 2013

USDJPY_Tumbles_After_Weaker_Philly_Fed_but_so_do_AUDUSD_and_EURUSD_body_Picture_1.png, USD/JPY Tumbles After Weaker Philly Fed but so do AUD/USD and EUR/USD

Charts Created using Marketscopeprepared by Christopher Vecchio

AUDUSD (left) and EURUSD (right) 1-minute Charts: August 15, 2013

USDJPY_Tumbles_After_Weaker_Philly_Fed_but_so_do_AUDUSD_and_EURUSD_body_x0000_i1028.png, USD/JPY Tumbles After Weaker Philly Fed but so do AUD/USD and EUR/USD

Charts Created using Marketscopeprepared by Christopher Vecchio

Following the releases, the USDJPY slipped from ¥98.33 to as low as 98.00. At the time this report was written, the pair had pulled back to 98.05. Accordingly given the sentiment shift (as noted in the prior paragraph), the AUDUSD and EURUSD gyrated more violently, first posting gains then sliding to new session lows (as seen in the second of the two charts above).

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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