USDJPY pressured to 109.45, we were told bids surround 109.50 were filled and there should be bids down to 20. Some said this selling was linked to Trump admin initiating Section 232 investigation. Others pointed to North Korea. 200-Day SMA at 110.21 will be like bees to honey.
While EURJPY came under pressure, price action suggested some interesting buying occurred near 128.00. The cross popped back up. EURUSD recovered to 1.17-handle but challenging ahead of 1.1720. There are some small option strikes from 1.1725 up to 1.1800, downside 1.1650 for EUR800mio. Watch for German Q1 final GDP, retail sales and GfK consumer confidence.
New Zealand recorded a trade surplus of NZD263mio in April but deficit in March revised to NZD156mio from NZD86mio. NZDUSD pretty unchanged at mid-0.69’s. Coincidentally a 0.6925 option strike matures today NY cut for NZD300mio. The pair is still sitting above 0.6855 and some specs are starting to focus on upside risk. Fibonacci 23.6% retracement at 0.6979, which was the high was Tuesday. 0.7000 will be a challenge.
The Times has published a report that PM Theresa May will ask the European Union for a second Brexit transition period to run until 2023 to avoid a hard border in Ireland. The Times said this proposal has not been tabled to EU, we could get a denial from No. 10 Downing Street. GBPUSD has traded higher, from 1.3353 to 1.3380, but didn’t last long. GBPJPY was sold and pushed Cable back to square one. We should see some resistance ahead of 1.3400. Just heads up, today we have U K April retail sales.
Asians
In Asian currencies, the USD traded sideways – CNY fixed at 6.3816 was aligned with banks’ estimates.
USDIDR, while calm, is still elevated at month’s high. Authorities have spoken. Indonesia’s FSA Chair Wimboh has called on Bank Indonesia to take steps to address volatility and minimise the impact of US rate hike. In swearing in of new BI Governor, Finance Minister Indrawati pledges support for BI to stability in ensuring growth. New Governor Perry Warjiyo said the central bank is committed to maintaining stability and exchange rate. USDIDR was one spread lower.
Bangko Sentral Pilipinas Governor has spoken out as well, Espenilla said decline in FX reserves won’t hurt the economy. BSP will seek to deepen FX market and eyeing swaps, forwards. BSP will cut banks’ reserve ratio this year.
USDHKD has backed away from 7.8500 and I will be watching the downside very carefully. This is starting to be a crowded trade and I fear break of 7.8290 will see speculators rushing for the door.