JPY, AUD flows: USD lower, JPY outperforming
JPY largely reversed the weakness seen late last week, but may now hold near current levels. AUD recovery could extend
Tuesday’s calendar is quiet, with the US and Canadian trade data the only numbers of significance, and the US data is unlikely to deviate much from the advance data already released. The USD is generally a little softer since the UK was last in the market on Friday, with the JPY the best performer, reversing the sharp losses seen at the end of last week. USD/JPY may still have a little more downside, but is closer to the normal yield spread correlation, and EUR/JPY has moved into line with the risk premium correlation, so there may not now be a lot to play for until we see some movement in equities or yields.
There were also some strong gains for the AUD in the early part of the week, and although AUD/USD failed to break above 0.85 and has reversed most of the upmove, it now seems to be holding above the key 0.6400/25 area, and this could bode well for further gains. The AUD has underperformed yield spreads in the last couple of years, and could now start to edge higher unless we see a significant turn lower in risk sentiment,
