Europe Summary and Highlights 2 Jul
USD/JPY down 1.5 figs after jittery market pares into holiday, wary of MoF guerrilla tactics
EUR/GBP extends the range breakdown
European morning session
European morning dominated by sharp, swift down move in USD/JPY, down from highs of 162.60 to lows just through 161. Exact trigger still topic of debate but market was primed for short yen covering ahead of data/US holiday in case of intervention, and Reuters sources story added to the potential for market spoofing i.e. long liquidate done noisily into a jittery market.
Action drags the dollar a touch, though EUR/USD only slightly north of 1.14 so still largely drifting into payrolls.
Other main interest remains EUR/GBP after breaking range support late yesterday. Follow through has been to 0.8550~. 0.85 is next down if move extends further on the breakout.
Asia Session
The May Australian Trade shows strong deficit. Export missed on sharp fall in gold and iron ore export while import remain pinned by high energy cost, so as cars, aircraft and telecoms. AUD/USD is trading 0.02% lower at 0.6892, dragged by poor regional sentiment. NZD/USD is trading 0.05% higher while USD/CAD is unchanged on relatively calm oil.
As USD/JPY hover around historic high, it is somewhat a surprise we do not hear more from Japanese officials on FX. Sources have told Reuters that Japanese officials are moving away from telegraphing intervention risk and toward unsignalled action designed to squeeze speculative yen short positions, seems to justify the latest silence. Element of surprise has always been critical but the amount of resources needed to execute a successful intervention seems to be heavy for the BoJ, even with their great war chest. USD/JPY is trading 0.11% lower at 162.39. Else, EUR/USD is up 0.07% and GBP/USDis up 0.1%.