Currency Updates:
AUD/USD Europe pushed the pair higher as JPY cross buys persisted and the market was leaning towards a dovish Fed outcome. AUD lifted from the 0.8860 area and sat near 0.8880 as NY got going. NY kept the bull pressure on as risk was elevated. AUD/JPY’s lift continued towards 96.25 and equity markets rallied early to aid AUD/USD’s rise. A broad based bout of USD sales post-option expiries saw the pair spike higher, run stops above 0.8900 and hit a 0.8912 high. Action then settled and the pair drifted lower as the Fed neared. The pair sat near 0.8885 as the Fed hit the wires. The message was not as dovish as hoped. US yield rocketed higher as did the USD. In no time AUD/USD dived to a 0.8780 low. Some give back in the USD rally saw the pair bounce and it sat near the 200-hour MA late in the day. Downside risks emerge as daily RSI diverged on the new s-t high, spreads narrow and the 10 & 21-DMAs are threatened. There is little data overnight so a further unwind by recent longs might persist.
EUR/USD An early dip to 1.2725 in Europe was bought. Risk sentiment was buoyed as equity markets & JPY crosses were firm. EUR/JPY rallied from 137.35/40 & aided EUR/USD’s lift towards 1.2745 into NY’s open. Bull pressure persisted in early NY as JPY crosses were well bid. EUR/USD’s lift got an extra boost after large options near 1.2700/25 were not close enough to pull the pair lower. USD sales then took hold post-expiry & EUR/USD spiked to a 1.2770 high. Action settled & light profit taking took hold as the market awaited the Fed. The Fed’s notes to labor resources gradually diminishing and the likelihood of inflation running persistently below 2% diminishing sent US yield and the USD soaring. EUR/USD was near 1.2740 pre-Fed & quickly hit a 1.2633 low afterwards. A slight bounce was seen & the pair sat just above 1.2645 late in the day. Bears are encouraged as a bear engulfing candle forms & the pair is back below the 10 & 21-DMAs. Daily lows at 1.2614 & 1.2605 are key s-t supports. Breaks open up a 1.2500 test.
USD/JPY The calm before the FOMC storm in the NY afternoon saw USD/JPY hue closely to the sizeable 108 options expiries at the 10ET cut amid subdued pre-FOMC trading, but with a slightly USD bullish & JPY bearish bias. The USD’s broad post-FOMC rally sent USD/JPY well past noted exporter offers at 108.40-50, with the 108.95 session high completing a 76.2% retracement of the Oct wide at 108.93. A further rise to at least the upper 21-day Bolli band, last at 109.55 and falling, is a fair bet. Above-f/c Japan IP & RS this week have lifted local spirits (N225), while perhaps reducing the prospect of QQE2 by the BOJ, though no major policy changes are expected at Friday’s meeting. The Reuters story that GPIF has already reduced JGB holds to below 50% (lowest ever) suggests the reallocation timing debate may be moot. High-betas lost ground to the yen after the FOMC caused further retracement of the mid-Oct plunge in expected rate hikes next year. AUD/JPY’s 96.27 high was rejected by the daily Cloud base & upper 21-day Bolli. EUR/JPY breached 138 before sliding to a tick below the o/n lows. Weekly investment flows tonight; US GDP tomorrow.
Looking Ahead – Economic Data (GMT)
• 23:50 JP Foreign Bond Investment w/e -1169.1b-prev
• 23:50 JP Foreign Invest JP Stock w/e -412.6b-prev
• 00:00 AU HIA New Hm Sales m/m Sep 3.3%-prev
• 00:30 AU Export Prices* Q3 -4.8%, -7.9%-prev
• 00:30 AU Import Prices* Q3 0%, -3%-prev
Looking Ahead – Events, Other Releases (GMT)
• 20:00 NZ RBNZ Rate Decision f/c 3.50%, 3.50%-prev
