Asian Open FX Analysis – EUR, JPY, AUD, USD

Despite runaway US treasury yields which saw 10-year yields hit their highest level since 2007, the USD was flat in Monday’s session as it seems improved risk sentiment and a technically overbought Dollar Index (DXY)held it in check. DXY traded within a tight range with a low of 103.13 and a high of 103.50, where it was again rejected at the major resistance set at the July and August to date highs. USD traders focus today will be on FedSpeak from Bowman, Goolsbee, and Barkin whose comments will be closely watched ahead of Jackson Hole later in the week.

EUR was the outperforming major currency, with EURUSD pushing hard to reclaim the psychological 1.09 level but failing to hold convincingly above. Another headline to hit the wires was HSBC giving a bullish take on the EUR “in part built on the idea of upside for the EUR from overly dovish rate expectations for the ECB”. They noted that while headline inflation figures are cooling, core inflation is proving stickier.

JPY resumed its march lower on Monday, reversing its 2-day rally from late last week. The jump higher in US yields saw carry traders back in action taking the USDJPY back above 146.00 from lows of 145.15. A note from JP Morgan stated that they believe the MoF will not intervene in the FX market at around 145 level as they did previously, with JPM analysts believing the threshold level for BoJ intervention being around 150 level.

AUD and NZD saw marginal gains vs the USD with the Kiwi the lagging vs the Aussie after New Zealand trade figures showed a deficit of 1.1bln in July, vs the prior surplus of 9mln. AUDUSD reclaimed the big figure at 0.6400, AUDNZD holding above the key 1.0800 level. A quiet calendar ahead today for both AUD and NZD, with general market sentiment likely to be the main drivers in price action for the rest of the week.