Intraday Market Thoughts

EURUSD Drops Below 1.22; USDX At Two Year High

by Patrik Urban
Jul 12, 2012 13:24

AUD weakens on disappointing labor market data; no changes from BOJ; Eurozone industrial production rose mixed; Italian auction. Focus turns to jobless claims, budget deficit and Canadian NHPI. All EURUSD & EURJPY shorts from Friday hit their targets. A new set of Premium Insights is due today.

The USD rally continued throughout the Asian and London sessions on the back of FOMC minutes that showed that the commission was not ready for further easing. European equities are losing about 1% and JPY with USD lead while AUD and NZD lag. EURUSD fell to 1.2186 which pushed USD Index to fresh two year highs.

The AUD weakened during the Asian session after the Australian labor market data fell short of expectations. The employment declined 27K in June while May's result was revised lower to 27.8K from initial 38.9K and the unemployment rate ticked up to 5.2% from previous 5.1%. AUDUSD trades near session lows around 1.0120.

The BOJ kept the overnight call rate steady between 0% and 0.1% and did not announce any new easing. The central bank only decided to change the size of selected funds such that the net effect would be no change in the total size of the asset purchase program. JPY initially weakened across the board but quickly recovered lost ground and currently trades higher across the board. Large moves were especially seen against the AUD and EUR while USDJPY lost only about 50 points and trades around 79.35.

On the data front, Eurozone industrial production rebounded in May 0.6% from -1.1% m/m but posted further decline 2.8% from 2.4% y/y.

Italy reached a full take up as it sold 12 month BOT totaling EUR 7.5 bln. The average yield fell considerably to 2.697% from previous 3.972% but cover declined to 1.55 from 1.73. Italian senate approved fiscal compact and the measure has to be ratified by the lower house.

The NY session starts at 8:30 am ET with jobless claims that are anticipated to rise marginally this week to 376K from previous 374K. Federal budget deficit is due at 2:00 pm and it is expected to narrow in June to USD 91.7 bln from 124.6 bln.

New housing price index from Canada is due at 8:30 am and it is seen steady in May at 0.2% m/m but lower at 2.3% from 2.5% y/y.

All EURJPY and EURUSD shorts from Friday hit targets. USDCAD , GBPUSD and AUDUSD were all stopped out, leaving USDJPY long in progress as the pair nears our target. A new set of Premium Insights will be released today. Click here for direct access ?a=664


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