Interest for carry trades was tempered in the European morning. JPY was better bid in Asia, with most JPY-pairs trading lower. EUR/JPY was under pressure the back of large EZ bond redemptions and coupon payments and AUD/JPY suffered after weaker than expected CPI. This drove price action via USD/JPY. However, good Japanese real money interest at the lows put a floor in place and this enabled the JPY crosses to recover recent losses.
EUR/JPY made the most impressive gains, clearing 161.00 offers to trigger stops above. AUD/JPY also made up ground and this fueled follow through speculative JPY selling across the board. USD/JPY was able to clear 118.70 and 118.80 to print a 118.94 high, while EUR/JPY extended to 161.49. Focus will turn to US confidence numbers and existing home sales in the afternoon session.
There is still some concern over the outlook for the US economy, which will drive dollar sentiment in the afternoon session. Elsewhere, growing perceptions of a Japanese rate hike may work against USD/JPY and EUR/JPY's topside in spite of today's recovery; and Golden Week holiday may also begin to temper speculative activity.
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