[achiever]

We saw a paradigm shift with the release of Non Farm Payroll last week. With the labour market improving, consumption is set to stabilize and monetary policy to be more effective as bank balance sheets and credit risk are finally aligned in the right direction. Hence, the latest reading of a somewhat weaker July consumer credit should be read as a lagging indicator. The USD should no longer be the main funding currency and will be quickly taken over by the JPY and EUR, AUDUSD decorrelation trade to diversify out of EUR holdings. EUR has come under renewed pressure, both in the overnight, as Sterling was sold on a report that the BoE is concerned about a Japan-style ‘lost decade’; and this morning as JPY crosses sold off on weaker-than-expected Chinese data. The pullback in euro-dollar has now extended through the 21-day moving average at $1.4200 as well as below the trendline from 22 April. This move is supported by the daily stochastic, although momentum is unconvincing. Also, it is early days, but bears may also choose to focus on the potential for the euro to form a major Head & Shoulders pattern over the coming week or so, should the euro pull-back to around $1.4300 before fading
again.