Australian Dollar
The Australian Jobs data was on the soft side. While the full-time number was boisterous, the participation rate was lower, and dealers are focussing on the last month’s revision lower.
The Aussie has been under pressure due to rising US Bond Yields and the jittery regional EM markets. However, it took little more than a reversal off recent high’s on commodity prices to set the wheels in motion for a probe below .7500
The iron ore markets were hammered as Mainland exchanges added margin controls on selected clients after breaching exchange trading rules as the regulators continue to kerb excessive speculation.
The implication is not insignificant the industrial metal was providing a tentative support for the Aussie as US yields rocket higher .
With commodity prices under the gun, we should expect the Aussie to stay offered as the currency pair primes for some serious catch up with the G-3 Block
The .7500 was a very significant psychological tipping point, and we may see losses accelerate lower if pressure remains on industrial commodities
Also, there was a definite focus on RBA Lowe’s comments suggesting the significant tail risk from a ” pullback in international free trade ” as the market in my view is now looking for any reason to short AUD as a proxy for regional APAC trade barrier implications, given the dwindling liquidity on the local NDF markets
Japanese Yen
As we enter the predictable consolidation phase of the current USD ramp, the focus will shift to the Dr Yellen’s testimony to Congress and the Q & A which will follow her prepared delivery. With the S & P under pressure overnight on profit taking the USDJPY lost some if it’s risk appeal but remains firmly bid on dips within the current 108.50-109.50 ranges. US dollar demand remains intact with very few willing to aggressively step in front of the trend. The USDJPY is trading firm in early trade after the BoJ announced the First Fixed -Rate Operation to Buy JGB’s in effort to keep longer dated yields in check supporting the BoJ resolve to control the shape of the yield curve in the wake of the recent global bond market rout .
Momentum is with the dollar, and it’s likely a matter of time, not if, the USDJPY challenges the psychologically important 110.00 level.
