Currency Updates:
AUD/USD A profit taking bounce begun in Europe’s morning faltered a bit in NY. AUD/USD sat just above 0.8740 as NY got going. The pair slid from NY’s open towards 0.8710. AUD/JPY’s drop from above 95.60 towards 93.25 and AUD/NZD’s slip below 1.1220 in early NY trading seemed to be the culprits driving AUD/USD lower. The dip for AUD/USD was short lived though as US pending home sales were soft and the Fed’s Evans stated USD strength will be taken into account in the way it affects trade & inflation. AUD/USD rebounded and hit a NY high of 0.8749. Resting offers from Asian names capped and the pair slid down. Late in the day the pair sat just below 0.8730. There is only second tier Oz data due later so traders look to China’s September HSBC Mfg-PMI. The prior reading was 50.2. A weak result likely sees AUD/USD get hit and the move may be exacerbated as tensions in Hong Kong may be increasing. A scenario such as that might see AUD/USD test the 2014 low at 0.8660.
EUR/USD Broad based USD weakness (particularly vs. JPY) in Europe initiated a profit taking short squeeze that had EUR/USD near 1.2690 into NY’s open. The lift continued as German Sep. HICP came in above f/c, USD weakness persisted in early NY and soft US yields offered no help the USD bulls. EUR/USD rallied to a session high of 1.2715. Resting offers from Asian names capped the rally and a recovery for the USD aided to push EUR/USD briefly below 1.2680. Dovish comments from the Fed’s Evans and his note of USD strength being taken into account on the affects of trade & inflation combined with a soft US pending home sales number to send EUR/USD higher once again. The pair traded above 1.2713 but bulls ran out of gas as the USD staged a recovery. Late in the day the pair sat just above 1.2690. Traders now look to German Aug retails sales & Sep unemployment data as well as EZ Sep CPI for cue tomorrow. Weak results will weigh on EUR. If the results are slightly upbeat a short squeeze might ensue but l-t bears likely fade any rallies as the mkt sees the ECB adding more easing measures soon.
USD/JPY The Asia peak and new trend high at 109.75 ran into trouble as stock markets and other risk trades were sold, some of it tied to worries about protests in HK and the mainland’s response to them, but more generally due to the prospect of eventual Fed tightening and doubts about the ECB’s ability to right the listing European ship with QEs. There are plenty of offers from exporters, spec long profit-takers and barrier and PRDCs defenses at 110, with stops building above. NorAm fund traders shrugged bargain-hunted after the stock market opened and O/N losses found buyers who were encouraged by Fed Evan’s taking some of the edge off next year’s pending tightening scenario. We’re hearing more about contingencies to tightened from the Fed these days. US econ were shrugged off, with most now waiting for NFPs this Friday to see if Aug’s downside miss was a one-off. Bids are concentrated between 109.00 and 109.15. The 10-DMA will be by 108.87 on Tuesday. There’s a slew of Japanese data tonight, but all for August. Abe & BOJ need Sep data, too, to decide on fiscal & Monetary policy for next year. EUR/JPY holding 21-DMA sppt. High-betas crosses heavy.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ Building Consents Aug 0.1%-prev
• 23:30 JP All Household Spding YY* Aug f/c -3.8%, -5.9%-prev
• 23:30 JP All Household Spending MM* Aug f/c 1.2%, -0.2%-prev
• 23:30 JP Jobs/Applicants Ratio Aug f/c 1.1, 1.1-prev
• 23:30 JP Unemployment Rate Aug f/c 3.8%, 3.8%-prev
• 23:50 JP Industrial output prelim mm Aug f/c 0.2%, 0.4%-prev
• 23:50 JP IP Forecast 1 Mth Ahead* Aug 1.3%-prev
• 23:50 JP IP Forecast 2 Mth Ahead* Aug 3.5%-prev
• 23:50 JP Retail Sales YY Aug f/c 0.3%, 0.5%-prev
Looking Ahead – Events, Other Releases (GMT)
• No major events scheduled
