Talking Points:
Australian, New Zealand Dollars Rise But Gains Continue to Look Corrective
Japanese Yen Rallies as CPI Data Dents BOJ Stimulus Bets, Sinks Nikkei 225
US Dollar May Renew Advance on Personal Income & Spending, UofM Data
The New Zealand Dollar outperformed in overnight trade, rebounding after sliding to a three-month low against its US namesake yesterday. We see the bounce as corrective and remain short NZDUSD. The Australian Dollar likewise moved higher, continuing to build on yesterday’s recovery. Here too, near-term upside momentum seems to be playing out in the context of a larger move downward and we continue to hold short AUDUSD.
The Japanese Yen rallied after April’s CPI report put the headline year-on-year inflation rate at 3.4 percent, the highest since 1991, eroding the likelihood of a near-term expansion of BOJ stimulus efforts. Added support was found in risk sentiment trends as fading monetary stimulus hopes weighed on the Japan’s Nikkei 225 benchmark stock index, feeding demand for the safe-linked currency.
A quiet economic calendar in European hours is likely to see traders looking ahead to the US data docket, where the spotlight will on April’s Personal Income and Spending figures as well as the final revision of May’s University of Michigan Consumer Confidence gauge. The trend in US economic data outcomes has looked increasingly supportive relative to expectations since early April, opening the door for upside surprises. Rosy news-flow is likely to bolster investors’ Fed policy outlook, driving the US Dollar higher.
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— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Yen Gains on CPI Data, Aussie and NZ Dollars in Correction Mode
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