Euro Touches 1.31 Ahead of Chinese Trade

USD/JPY proved irrepressible on Tuesday as the euro edged above 1.31. The best performers on the day were AUD and NZD while the US dollar lagged. The upcoming session offers some insight into the strength of the Chinese economy with trade figures. All 4 longs in EURJPY of the past 2 days hit final targets, while 2 silver and 1 gold were stopped out. EURUSD and USDCAD longs remain in progress as does oil. For full detail, please see the latest Premium Insights.

Overall sentiment was upbeat on Tuesday as the S&P 500 touched the highest since 2007. That positive mood meant broad US dollar weakness and gains for EUR, AUD and gold.

The yen is still the most captivating trade and the bulls demonstrated their willingness to buy once again, despite a flat close. A swift fall to 98.60 was rapidly gobbled up and the patient longs waiting for a deeper pullback were turned away once again as the pair rose to 99.30.

Turning to the Asia-Pacific region, yesterday we found out that Chinese inflation was slower than expected and today the focus shifts to pipeline growth. Trade balance figures will be released at 0200 GMT but a surplus/deficit is less important than the magnitude of the rises in imports and exports.

Imports are forecast to rise 6.0% y/y and exports 11.7% y/y. Imports will be followed especially closely after a 15.2% y/y drop in February that was probably skewed by the early Chinese New Year. Chinese imports tend to be a solid long-term forecaster of growth because they are at an early stage in the global supply chain.

AUD/USD broke a March-April double top on Tuesday and touched the highest since January but the follow-through was negligible. An upbeat Chinese trade report would clear the way for a test of a higher range.