Currency Updates:
AUD/USD Broad based USD strength in Europe’s morning saw most of Asia’s gains erased. The pair fell from the day’s 0.8768 high & sat near 0.8720 at Ny’s open. Further USD gains early on saw NY hit a low of 0.8706 but no further losses were possible. EUR/AUD’s plunge from above 1.4585 towards 1.4420 and some give backs in USD’s rally combined with some soft US econ data to allow AUD/USD a lift from the NY low. The rise saw the pair near 0.8760. Short covering into tonight’s Oz retail sales & China’s Sep NBS Mfg- PMI likely aided the lift. Late in the day the pair sat just below 0.8760. The market is positioned short so topside surprises to the Oz & China data later may see a decent squeeze. Oversold day/week RSIs need unwinding and may exacerbate a squeeze should one take hold. If the data is rotten then the 2014 low is likely back in play.
EUR/USD Europe crushed EUR/USD to 1.2590 after EZ CPI was initially reported below f/c. Broad based USD strength exacerbated the move. Early NY saw that USD strength carry over and EUR/USD was driven to a new trend low of 1.2571. The USD’s rally abated and EUR selling relented. A profit taking lift took hold. The lift’s pace increased though. A combination of a string of below f/c US econ data and an upward revision to the EZ core inflation estimate from 0.7% to 0.8% y/y from Eurostat aided to speed the rise. EUR/USD rallied to 1.2635. The USD remained somewhat soft in NY’s afternoon and EUR/USD sat just below NY’s high late in the day. The market remains in sell rally mode and offers are touted in the 1.2655/60 area with more in the 1.2690/00 area. The risk of a squeeze remains but a squeeze is unlikely to gain much traction as the ECB meets Thursday. The market is expecting the ECB to up its easing arsenal at some point in order to seriously expand its balance sheet and EUR likely stays heavy as a result.
USD/JPY Soft Japanese data o/n and decent gains in Tsy yields accompanied the late-Asia to early NorAm rise in USD/JPY to 109.86. Mostly below-f/c US data and still fairly staunch resistance into the 110 barriers, spec P/T & exporter offers, as well as PRDC structures were enough at period end to foster a pullback to the hourly Kijun at 109.50. USD/JPY then settled into a quiet range between the day’s high and the importer and fund bidders at 109.50. More bids are noted just above and into 109, by the 10-DMA & Tenkan lines. Those line should be at or a bit above 109.50 Wed. Interestingly, USD-JGB 2-yr spreads haven’t made new highs since the 24th and 10-yr spreads peaked on the 18th. That USD/JPY’s been able to make new highs since then shows at least some of the USD’s appeal is as a safe haven; a category the yen used to dominate when Japan was deflating, it ran Trade surpluses instead of deficits, and before the BOJ launched QQE. Next week the BOJ will have another shot at revising down its reflation expectations closer to the market and the econ results since April’s consumption tax hike, but QQE2 will likely have to wait.
Looking Ahead – Economic Data (GMT)
• 23:30 AU AIG Manufacturing Index Sep 47.3-prev
• 23:50 JP Tankan Big Mf Idx Q3 f/c 10, 12-prev
• 23:50 JP Tankan Big Mf Outlook DI Q3 f/c 12, 15-prev
• 23:50 JP Tankan Big Non-Mf Idx Q3 f/c 17, 19-prev
• 23:50 JP Tankan big non-mf outlook DI Q3 f/c 18, 19-prev
• 23:50 JP Tankan All Big Capex Est Q3 f/c 7.2%, 7.4%-prev
• 23:50 JP Tankan Small Mf Idx Q3 f/c -1, 1-prev
• 23:50 JP Tankan Sm Mf Outlook DI Q3 f/c 0%, 3-prev
• 23:50 JP Tankan Small Non-Mf Idx Q3 f/c 0, 2-prev
• 23:50 JP Tankan sm non-mf outlook DI Q3 f/c -1, 0-prev
• 23:50 JP Tankan All Sm Capex Est Q3 f/c -13.9%, -19.7%-prev
• 1:35 JP Manufacturing PMI Sep 52.2-prev
• 1:00 CN NBS Manufacturing PMI* Sep f/c 51, 51.1-prev
• 1:30 AU Retail Sales MM Aug f/c 0.4%, 0.4%-prev
Looking Ahead – Events, Other Releases (GMT)
• No major events scheduled
