Intraday Market Thoughts

Asymmetry in USD/JPY a Tell?

by Adam Button
Jun 4, 2014 2:03

Rising Treasury yields helped boost the US dollar ahead of a busy data slate. The euro also began to prove that negative headlines are less of a threat. On the heels of the RBA decision, Australian releases Q1 GDP data in the hours ahead.  In the Premium Insights, our AUDNZD deepens in the green with over +200 pips, while USDCAD longs have stabilized after surviving the 1.0820 long. We will issue a new set of Premium Insights in addition to the 10 existing trades on Wednesday morning.

The persistent fall in Treasury yields has reversed into a persistent rise and what's notable is that only the later move has had an effect on USD/JPY. The pair stubbornly held onto a bid above 101.00 even as 10-year Treasury yields fell to the lowest since June last week. Yields are now 20 basis points off the lows at 2.60% and USD/JPY has climbed 100 pips to 102.50. The asymmetrical relationship is a bullish sign for the pair and the better performance from the Nikkei is also contributing.

The market shrugged off economic news throughout the day because larger events are looming. US factory orders rose 0.7% compared to 0.5% but the details of the report were mixed. Defense orders drove the entire gain and revisions to the durable goods orders data were neutral. The main upbeat sign was in US vehicle sales data as sales rose to a 16.77m pace compared to 16.1m expected.

Perhaps the most interesting move was the lack of a market reaction when Bloomberg, citing 2 sources, said Draghi is likely to signal that any interest cut won't necessarily be the final one. The euro hardly reacted in a sign that ECB bets are already placed or a dovish message is already priced in.

The data highlight in Asia-Pacific trading is Q1 GDP at 0130 GMT. The q/q median is a healthy +0.9% but the risks might be higher. The RBA was a bit more optimistic in yesterday's decision and that could be because officials had a sneak peak at the data.

Act Exp Prev GMT
Net Exports of GDP (1Q)
1.4% 0.80 0.60 Jun 03 1:30
Gross Domestic Product (Q1) (q/q)
1.0% 0.8% Jun 04 1:30
Gross Domestic Product (Q1) (y/y)
3.3% 2.8% Jun 04 1:30
Eurozone GDP s.a. (Q1) (q/q)
0.2% 0.2% Jun 04 9:00
Eurozone GDP s.a. (Q1) (q/q) [P]
0.2% 0.2% Jun 04 9:00
Eurozone GDP s.a. (Q1) (y/y)
0.9% 0.5% Jun 04 9:00
Factory Orders (APR) (m/m)
0.7% 0.5% 1.5% Jun 03 14:00
Domestic Vehicle Sales (MAY)
13.11M 12.67M 12.65M Jun 03 19:32
Total Vehicle Sales (MAY)
16.70M 16.10M 15.98M Jun 03 19:32

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