SNB Chatter Continues, USD/JPY Stumbles

The Swiss press highlighted a report on the SNB aiming for a soft 1.05-1.10 band for EUR/CHF and that boosted the pair early in the week. Last week the yen was the top performer while the Canadian dollar lagged. CFTC data showed fewer yen shorts. China's manuf PMI hut 2 1/2 year low. Although Thursday's Premium short in USDJPY with entry at 118.50-118.80 missed the 118.50 fill by 1 point, sveeral clients opted for the manual fill and opened the trade themselves. The trade is now 1150 pips in the money. NZDCAD remains in progress.

The Swiss Tages Anzeiger referred to “a well-informed source” on the SNB willing to lose 10 billion francs to maintain a 1.05-1.10 corridor. The report isn't definitive and is equal parts speculation and sources but it lifted EUR/CHF nearly a full point higher to 1.0500 before it trimmed a quarter-cent.

The other big move to start the week was in USD/JPY as it fell by as much as 70 pips to 116.66; that's the lowest in two weeks and broke the deadlock around 118.00. Traders will be watching to see if the move is maintained once liquidity improves. So far the loss has been pared to 117.20.

The fundamental weekend news focused on China where official PMI's for January were soft. The manufacturing reading fell to 49.8 compared to 50.2 expected. The non-manufacturing data was at 53.7 vs 54.1 prior. The manufacturing number is the key reading and it's the first time below 50 since Sept 2012. The market may be hesitant to react until the HSBC final reading is delivered at 0145 GMT. The preliminary reading was 49.8.

The Australian dollar may be unlikely to react either way with the RBA decision on Tuesday. A final driver could be the inflation report from TD Securities at 2330 GMT. The prior reading was 1.5% y/y.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR -185K vs -181K prior JPY -64K vs -78K prior GBP -45K vs -46K prior AUD -49K vs -47K prior CAD -24K vs -29K prior CHF -24K vs -29K prior

The larger move was in USD/JPY and that leaves more dry fuel if the pair embarks on a break higher above the recent range. But what really stands out is the lack of enthusiasm in CAD shorts. Specs missed the boat but could be looking for a bounce to buy.