Bill Baruch looks at short-term fundamentals of Yen, Aussie & Canadian Dollars.
Forex review: Yen
Session close: Settled at 1.15265, down 0.5 a tick
Fundamentals: The euro is finishing a quiet session unchanged. Risk-sentiment soured a bit to start the week after China’s trade data and Eurozone Industrial Production both whiffed. Tuesday, U.K Prime Minister May’s Brexit deal goes to a Parliamentary vote. It is widely expected to get shot down, but markets have found comfort in pricing in an extension of the March deadline. The U.S government shutdown is in its fourth week and this slims out the economic calendar. However, we get the Producer Price Index (PPI) and NY Empire State Manufacturing as well as Fed several Fed Governors speaking. ECB President Mario Draghi is expected to speak at 9:00 am CT. Today, Janet Yellen went on record saying the Fed could have made its last rate hike of this cycle in December. This all explains the 30-tick wide range today.
Japanese Yen (JYH)
Session close: Settled at .9288, up 25 ticks
Fundamentals: Equity markets gaped lower on the open last night and the yen responded by trading higher. It found a further tailwind in an otherwise quiet session after the latest trade figures from China disappointed. China’s trade surplus with the U.S also widened to $323 billion. With risk-assets bouncing back at the onset of U.S hours, the yen rally dissipated but price action remained constructive. If equity markets attempt to dig lower once again overnight, look for the yen to find a path of least resistance back near previous highs.
Aussie (ADH)
Session close: Settled at .7206, up 8 ticks
Fundamentals: Given the China Trade Balance headlines, this was a good session for the Aussie. The currency is up 2.2% in January and the Chinese yuan has gained 1.6% against the Aussie over the same period; this is not a coincidence. The Australian data has not particularly been something to write home about over this time with the trade balance coming in soft and Building Approvals the appearance of a horror flick (-9.1% versus -0.3% expected) last week. However, retail sales did beat. While we do believe that risk-sentiment in equity markets have reached a near-term exhaustion, the Chinese yuan has more to gain. This should be favorable for the Aussie, but traders should trek cautiously in the near-term after such a run.
Canadian dollar (CDH)
Session close: Settled at .75485, up 1.5 ticks
Fundamentals: Overall risk-sentiment on the heels of Chinese data and a weaker energy complex weighed on the loonie today. The currency has had a heck of a recovery through the first two weeks of the year and taking a breather for 48 trading hours is almost expected. Traders should tread cautiously. With nothing from Canada on the calendar tomorrow, U.S data and Fed speak will be the focal point.
