USD/JPY opened strongly on Monday, moving above 103, while EUR/JPY tested resistance near 141.50 as solid risk appetite triggered widespread yen selling. The latest Japanese economic data recorded a small downward revision to the third-quarter GDP data and there was also another monthly current account deficit which reinforced a lack of confidence in underlying Japanese fundamentals. The dollar pushed to a high of 103.20 before drifting slightly lower with no impetus at this stage for further dollar gains, especially as US Treasury yields moved slightly lower.
The latest CFTC positioning data recorded a further small increase in speculative yen shorts to a fresh six-year peak. There may have been a slight decline since then given last week’s correction, but there will still be an important risk of short liquidation and there were reservations over aggressive yen selling.
There was a stronger than expected reading for the Chinese trade data and a lower than expected figure for consumer inflation. This combination helped underpin risk conditions and provided some Australian dollar support. AUD/USD moved above the 0.91 level, peaking at 0.9125 before retreating back towards 0.9070.
The CFTC data also recorded a switch back to a net long Euro contracts in the latest week, but the positioning is relatively modest for now. Monday’s trading following the US payroll data is traditionally one of the quietest sessions of the month and this certainly proved to be the case this time around as very narrow ranges prevailed during the day.
As far as Euro-zone developments are concerned, Bundesbank head Weidmann stated that the ECB was ready to act again if low inflation jeopardises a recovery while fellow ECB member Mersch was very cautious surrounding any potential quantitative easing.
The latest economic data releases did little to spark any significant moves with a weaker than expected Sentix investor confidence index and a decline in German industrial production failing to unsettle the Euro.
Following the stronger than expected payrolls data on Friday, markets were looking for any Fed remarks on the possibility of a December tapering of bond purchases with three regional Fed Presidents, including FOMC voting member Bullard, due to speak later on Monday. EUR/USD found support on a brief dip to below 1.3700 and moved to test resistance at 1.3730 during the European session.
Sterling recovered from losses seen on Friday as short retail positioning had little success. EUR/GBP hit strong selling interest on approach to 0.94 and GBP/USD looked to challenge the 1.64 resistance area.