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FOREX: JPY Spot TWI Nears 5% Rally Off Lows, EUR Sinks on PMIs

FOREX
  • Once again, broad JPY strength was evident across the European open, with JPY the best performing currency across G10 for a third consecutive session. JPY got a boost from a further flight-to-quality, a poor showing from global equity futures markets and a continued unwind of the carry trade fuelled USD/JPY rally. Cross-selling against antipodean currencies continues to stand out.
  • After the key technical breaks in AUD/JPY earlier in the week, NZD/JPY is following suit Wednesday as price breaks the 200-dma support for the first time since June last year. Slippage through 90.82 would mark a total reversal of the rally  off the early May lows, and could come into contention on an extension lower - the cross has traded lower in 10 of the past 11 sessions - helping trigger  a technically oversold signal in the 14-day RSI.
  • EUR similarly trades poorly on the back of a soft set of PMIs from France, Germany and the Eurozone-wide reading. EUR/USD was pressured to a new pullback low at 1.0826 on heavy volumes - making for the busiest session of the week so far. Interestingly, the protracted spot weakness off last week's high has worked against the formation of a 'golden cross' in DMA space (50-dma > 200-dma), denying  markets a possible positive technical signal to slow the decline and build a  base for a recovery.
  • Focus turns to the remaining flash PMI prints today, aswell as the Bank of Canada rate decision, at which markets are split between a hold and a back-to-back 25bps rate cut, which would put the base rate at 4.50%. OIS pricing has another easing step priced at ~90% probability. New home sales data are then set to follow for June. 
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