At pre-open, we met a Japanese seller out of Sydney hitting UsdJpy bids. Could be him printing low of 100.05. The pair officially opened at 100.35 versus close of 100.54. Nikkei opened strong at +1.8% but UsdJpy continued to struggle. Every inch upwards ran into offers. Usd go to 100.875 then fell back to 100.50’s in late morning.
Why is the UsdJpy so offered post-Japan Upper House elections? The fear is that PM Shinzo Abe will move his focus away from fighting deflation to revising the constitution which many view as time consuming and could distract the government from its economic program.
Euro dollar was more or less the same from where NY closed last Friday. Bit of Usd buying across the board gave EurUsd a nudge towards the 1.1030’s. Downside bids ahead of 1.1000. Stop buy orders are scattered above 1.1120. We heard intraday offers are reported above 1.1065 and there is a 1.1100 option strike maturing today NY cut worth about Eur1.4bn.
Bank of Canada meets this week July 13 at 10.00am local. Our strategist Bipan said this will be the first time we hear from the BOC since the Brexit shock. Additionally, markets will have a fresh MPR to work with which will also contain updated forecasts and projections. It’s unlikely that growth and core inflation forecasts will change materially from April, but watch for slight upward adjustment to headline inflation given rise in crude prices since then. Our economics team is expecting the next move to be a hike in Q4 2017.
Keep a close watch on the oil price. Last week our trader Jon pointed out that danger lurks on the downside. WTI Sept 16 contract has broken the long-term trend line but the 100-Day SMA comes in at 45.36, 200-Day at 44.96.
Little change in Aud and Nzd – mildly weaker.
USDCNY fixed today at 6.6843, in line with traders’ estimates. USDCNH began the day bid, rose to 6.7058 with demand seen from North Asian accounts. Towards late morning, USDCNH gave up gains and returned below 6.7000.