[B]Talking Points
• Japanese Yen: Falls below 108.00 as BOJ holds course
• Euro: First Trade deficit in 12 months
• British Pound: weakens across the board
• US Dollar: TICs on tap
[/B]
[U][B]Euro Tries For 1.4700 But Comes Up Shy[/B][/U]
EURUSD continued to strengthen for most of the Asian and early European session today, but the pair ran into serious resistance just shy of the 1.4700 level after EZ Trade data revealed the first monthly deficit in the region in over a year. EZ Trade Balance printed at -4.2 Billion versus 0.5 Billion expected catching the market off-guard.
A closer look at the figures revealed that the gap was due primarily to energy and crude material costs while manufactured goods actually increased from 222 Billion euros to 249 Billion euros. Nevertheless, tonight’s deteriorating trade figures from Europe stand in contrast to yesterday’s better-than-forecast trade numbers from the US and suggest that despite the Herculean efforts by European producers, the unfavorable exchange rate is starting to exert a toll.
However, the downside surprise had only a minimal impact on EURUSD trade as currency markets traded primarily on risk appetite flows. With European bourses in the green, EURUSD got a boost from EURJPY gains and remained higher on the night. Yen meanwhile flirted with the 108.00 figure for most of the overnight session in the aftermath of the BOJ rate decision which as expected left the lending rate unchanged at 0.5%.
The only slight surprise from the BOJ meeting was the relatively hawkish posture of Governor Fukui. Many analysts expected the BOJ chief to perhaps signal the start of a new easing campaign in light of the fact that Japanese consumer confidence surveys have hit 6 year lows. But Mr. Fukui noted that the positive cycle in Japan economy while weakening but still intact, essentially quelling any notion of easing in the near term. USDJPY initially rallied as carry demand drove the market but then turned and dropped through the 108.00 level as traders reconsidered the implication of Governor Fukui’s words.
In North American session today, the markets face a busy economic calendar ahead of the holiday week-end. As we noted yesterday, TICS data remains critical to the stability of the greenback. Analysts expect a print of 76 Billion which would be more than sufficient to offset the shrinking Trade Deficit. If however it comes in considerably lower the EURUSD cloud rally higher as structural concerns about the US’s ability to finance itself may once preoccupy the market.
How will TICS print? Join us in the EURUSD forum
