Yen Breakdown in Progress
Yen crosses simultaneously broke out on a number of fronts on Thursday, hitting long-term extremes. It was an especially active day with GBP leading and AUD lagging.
The calendar is light in Asia but look for continued focus on Japanese and Chinese stock markets.
Technicals dominated trading Thursday as many major levels were broken or patterns resolved:
- GBP/JPY broke the key 2009 top to a 5-year high
- EUR/JPY reversed Wednesday's sharp drop and hit a 4-year high
- USD/JPY took out the Sept high to emphasize the wedge breakout
- AUD/USD broke the neckline of the fall head & shoulders top
- Gold continued lower after the break of the Oct low
- 30-year Treasury yields rose within a fraction of the August high
There was no single catalyst for the moves but the market is growing more comfortable with the idea of a taper in December or January. Initial jobless claims at 323k compared to 335k helped the trade along with a strong Markit PMI but a soft Philly Fed curbed the enthusiasm, especially in bonds. The Fed's Bullard also removed a dovish risk saying a cut in IOER was only being contemplated if a downturn hits.
The weakness in the Australian dollar was product of jawboning from Stevens but anti-currency rhetoric usually only works if the currency is ready to tumble anyway. That it fell so hard on a day when US stocks were up 0.8% is a negative sign.
Early in Asia-Pacific trading, RBNZ assistant governor McDermott tried to talk down the kiwi but had no success. NZD/USD has now wiped out most of Thursday's losses and continues to fight off the head and shoulders pattern on the daily chart.
|Markit US PMI Preliminary (NOV)|
|54.3||52.3||51.8||Nov 21 13:58|
|50.4||50.8||50.9||Nov 21 1:45|
|Initial Jobless Claims (NOV 15)|
|323K||335K||344K||Nov 21 13:30|
|Continuing Jobless Claims (NOV 8)|
|2.876M||2.870M||2.810M||Nov 21 13:30|
|Philadelphia Fed Manufacturing Survey (NOV)|
|6.5||15.0||19.8||Nov 21 15:00|
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