Intraday Market Thoughts

Yen Crosses March on, Cable Crumbles

by Adam Button
Feb 3, 2013 22:28

More positive signs on the US economy helped yen crosses carve out fresh cycle highs on Friday. On the week, the Swiss franc was the best performer while the yen lagged. Weekly positioning data shows that speculators have been wrong-footed on cable. Here is the AUDIO/VIDEO recording of Ashraf's Thursday webinar making explaining his rationale for his recent calls on FX, gold and oil. Direct link here:

Over the weekend, Japan's Fin Min Aso said this weekend the govt isn't manipulating the yen, "The recent fall in the currency is a result of our efforts to beat deflation"

Non-farm payrolls rose 157K in January, which was very close to expectations but benchmark revisions to led to an additional 127K jobs in Nov and Dec.

The initial reaction was to sell the euro and USD/JPY as the unemployment rate rose to 7.9% from 7.8%. That reaction quickly reversed, in part, due to the Fed's Bullard who hinted at tapering bond buys if unemployment fell to the 'low 7s'. That's a higher threshold than the Fed's stated 6.5% rate.

USD/JPY continued to rise after the ISM manufacturing index hit a seven-month high at 53.1 compared to 50.6 expected.USD/JPY marched relentless higher in late US trading to close at 92.83. The euro broke above 1.37 but a round of profit taking late in the day sank the pair to 1.3639.

Commitments of Traders

Weekly futures positioning data from the CFTC, as of the close on Tuesday. JPY -71K vs -64K last week EUR +27K vs +21K prior AUD +85K vs +97K prior CHF +4K vs +6K prior GBP +10K vs +18K prior NZD +22K vs +24K prior CAD +35K vs +58K exp

The main takeaway is that speculators haven't taken part in the recent cable declines. If cable continues to fall and positioning switches, it could add to GBP/USD pressure in a potential test of 1.50.

Another takeaway is that the market remains highly committed to AUD longs despite four weeks of near-zero gains. Impatient traders may quickly clear out if AUD/USD begins to decline.

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