Currency Updates:
AUD/USD Early Europe saw the pair rally towards 0.8900. EUR/AUD’s slide below 1.4450 aided the lift as did a soft USD. EUR stayed heavy but the USD firmed and took over as the driver. AUD/USD slid from its high & sat near 0.8875 at NY’s open. Further USD strength helped the pair to trade briefly below 0.8850. The EUR remained heavy and drove EUR/AUD below 1.4380 which likely countered the USD strength and prevented larger losses for AUD/USD. Reports that China may change its central bank head and some dovish Fed comments allowed a bounce. The pair sat near 0.8875 late in the day. There are no major data points to impact AUD in Asia so traders will look to the RBA’s Chief Stevens speech to the Melbourne Economic Forum for some cues. If Stevens does mention AUD he’ll likely stick to the script of it being too strong. The pair then may be weighed down and we might then revisit the Sep 23 low.
EUR/USD Europe pushed EUR/USD lower from hourly resistance near 1.2865 early in their session. Further pressure was added on the soft German IFO and the pair sat near 1.2850 into NY’s open. The pressure remained as HFs who looked to sell above 1.2900 on Sep 23 came to market. Broad USD strength emerged in NY and EUR/USD’s slide quickened as macro names were noted USD buyers. The Sep 22 low was cleared and a quick move towards the 1.2800 barrier took hold as US names were big sellers. Defense of the barrier was solid at first as very large bids into 1.2800 were noted. Relentless bear pressure saw them give way though. The 1.28 break saw a quick dive to 1.2785 followed by a small bounce back to 1.2800. The pair eventually hit a 1.2774 low as the USD stayed firm. A small bounce was seen after some dovish Fed comment. The bounce faded and the pair sat just above the low late in the day. The new trend low and long upper wicks on the Sep 23 and weekly candles build bearish sentiment. RSIs are biased down & yield spreads widen to add weight. A 1.2740/50 test looks imminent.
USD/JPY Holding USD/JPY down is like keeping a beach ball underwater. Abe gave it a whirl o/n noting on Jiji that he needed to closely watch the impact on Japan’s regional economies from a weakening yen, while Dudley, Yellen and others have tried to play down the Fed’s dots since the last meeting, and Dudley noting a big USD rise could affect monetary policy (delay tightening). In the end, with Tsy yields and equities rebounding today and US Aug New Home Sales growth exploding 18% m/m, USD/JPY resurfaced above the down TL from last week’s highs and breached Tues’s 109 high, if only marginally thus far. Even if the Fed drags their feet on rate hikes, they’re competing with a BOJ that’s not going to stop QQE any time soon and is certainly not going to raise rates next year. 109.50 and 110 barriers are the topside targets. EUR/JPY ran sell stops below 139.20/15 (weekly Cloud top & 38.2% Fibo) on worries the ECB is running out of options to rebuild its balance sheet, in part, as an S&P report noted, due to growing political opposition in Germany. 139 held, though, so damage was limited. Aug Corp Services Prices out of Japan tonight, CPI Friday.
Looking Ahead – Economic Data (GMT)
• No Significant Data
Looking Ahead – Events, Other Releases (GMT)
• 02:30 AU RBA’s Stevens Remarks at Melbourne Economic Forum
