Currency Updates:
AUD/USD Most of the gains posted after AUD/USD bounced off big support in the 0.8660/70 zone were eroded as NY got going. Europe dropped the pair from near 0.8730 and it sat near 0.8695 into NY’s open. The pair looked set to drop further as ADP beats forecasts but the market ignored the data and focused on US bond yields instead. Yields dropped quickly shortly after the data. Broad base USD sales took hold and AUD/USD again tested near 0.8730. The level broke as ISM and construction spending came in below estimates. The pair hit a NY high of 0.8748. The pair then dived down to 0.8705. An article by the Herald Sun’s McCrann stating the retail sales data could justify an RBA cut as well as a sinking NZD due to weak milk prices seemed to be the culprits to lower the pair. The dip didn’t last long though as US yields and the USD remained under pressure. AUD/USD sat just below 0.8740 late in the day. Traders now look to Oz Aug. trade data & building permits for their cue in Asia. Weak results should see the pair make a move back to the 0.8660/70 area.
EUR/USD was in consolidation mode for Europe & NY as the market awaits the ECB. Europe pusehd the pair to s-t support near 1.2585 into NY’s open. The pair looked set to make more losses as ADP beat forecasts but the pair rallied shortly after the data. US bond yield saw a big slide after the data and the USD went broadly offered. EUR/USD ralied to a 1.2640 high. No further gains were possible though. Weak equirty markets combined with JPY strength to send EUR/JPY crashing though 137.95. It eventually hit a 137.62 low. EUR/USD was dragged from its high and hit 1.2590. The slide ran out of steam though and the pair bounced to sit just above 1.2605 late in the day. Traders now look to the ECB to for the details of ABS & covered bond buys. Some trades might be looking for additional measures to be announced from the ECB after GErman and EZ PMIs were soft today while soft inflation data early in the week suggest deflation or larger disinflation may become a bigger issue for the zone. EUR/USD remains a sell on rallies for now.
USD/JPY After rising through option barriers/PRDCs and stops at/above 110, USD/JPY ran into offers defending 110.10. That set the bearish tone for the day. Plunging equity prices and Tsy yields (and USD-JPY yield spreads) ushered prices below bids at 109.50 and into stops below. At this writing, the 10-DMA at 109.13 is still holding its initial test, but prices are near their as the NY session draws toward its conclusion. While ADP was solid, ISM missed enough to suggest to some that the story of stoic US growth vs slowdowns almost everywhere else might be overstating the USD’s yield-driven case. Fed dot plots are looking even less realistic. With USD/JPY hugely O/B across medium & L-T timeframes, the threat of an overdue correction persists. Prices haven’t closed below the daily Tenkan (109.17) since clearing it on Aug 13 at 102.80. With asset classes far & wide straining under de-risking/repatriation flows and most Japanese businesses and consumers no longer happy with a falling yen, if the NFP report disappoints Friday and USD/JPY does not finally correct, we’ll know just how strong the uptrend is. EUR/JPY is retracing the remainder of Sep’s rebound.
Looking Ahead – Economic Data (GMT)
• 23:50 JP Foreign Bond Investment w/e 773.9b-prev
• 23:50 JP Foreign Invest JP Stock w/e 294.8b-prev
• 01:00 AU HIA New Home Sales m/m Aug -5.7%-prev
• 01:30 AU Building Approvals* Aug f/c 0.01, 2.5%-prev
• 01:30 AU Private House Approvals* Aug 1.4%-prev
• 01:30 AU Trade Balance G&S (A$)* Aug f/c -700m, -1359m-prev
• 01:30 AU Goods/Services Imports* Aug 0%-prev
• 01:30 AU Goods/Services Exports* Aug 1%-prev
Looking Ahead – Events, Other Releases (GMT)
• No major events scheduled
