Intraday Market Thoughts

Another G7 Greenlight to Japanese QE

by Ashraf Laidi
May 12, 2013 23:33

USD/JPY opens the week higher after the G7 refrained from censuring Japanese efforts to boost inflation. In the past week, the US dollar has been the top performer while NZD and JPY lagged. Weekly futures positioning data showed a drop in AUD longs. After 1 of USDCAD and 1 EURUSD hit final targets, both EURAUD remain in progress. 1 cable short was stopped out. Those existing Premium trades are seen in the latest Premium Insights.

With the sharp fall in the yen late last week, all eyes were on the G7 to see if politicians would rebuke Japan. That wasn't the case, at least publically. Japanese Deputy PM Aso said there was no criticism of BOJ monetary policy or the weak yen. USD/JPY had started the week stronger, up 25 pips to 101.87. Other G7 news included a commitment to increase efforts to save failing banks.

Markets will quickly shift their focus to the Chinese economy in the upcoming session. After several lower-tier releases from Australia, China releases industrial production and retail sales numbers for March at 0130 GMT.

China Industrial production is expected 9.4% higher year-over-year and retail sales are expected up 12.8%. The IP number is generally the more-important one for the Australian dollar. Given the swift fall in AUD late last, week look for a potential snap back to 1.01 on a strong reading.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -33K vs -30K prior JPY -78K vs -71K prior GBP -63K vs -59K prior AUD +6K vs +30K prior CAD -52K vs -68K prior CHF -6K vs -8K prior

The big move is in the Australian dollar, which is in danger of falling to a 'net short' position. The rate cut and dovish rhetoric sent speculative traders fleeing the Aussie. It might be a stretch to begin predicting a large net short position, however, because the cost of carrying short AUD positions is prohibitive.

Act Exp Prev GMT
Industrial Production (APR) (y/y)
9.5% 8.9% May 13 5:30
Retail Sales (APR) (m/m)
-0.2% -0.4% May 13 12:30
Retail Sales (ex. Autos) (APR) (m/m)
-0.1% -0.4% May 13 12:30
Retail Sales (y/y)
12.8% 12.6% May 13 5:30

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