Currency Updates:
AUD/USD Europe & NY consolidated the pair after Asia initiated short covering once the test of 0.8640 failed to break lower. The pair lingered in basically a 0.8710/50 range as the mixed econ signals from Oz and benign RBA gave no catalyst to drive the pair majorly in either direction. There is some risk of a bigger short squeeze for now. Daily and weekly RSIs haven’t confirmed recent lows and today’s candle shows bulls are putting up a good fight near key support. With more big data risks due traders may feel it wise to cover some shorts. Global services PMIs are released tomorrow and we get numerous Fed speakers as well. Thursday give the Oz October jobs and then Friday sees the big US NFP report. Bears will need a big upside surprise to the NFP to get the longer-term downtrend going again
EUR/USD A tight range held for Europe and NY’s morning. The pair lingered in a 1.2500/30 range as the market seemed content to wait for the ECB on Thursday & NFP on Friday. The pair sat near the lower end of the range when the market was abruptly shaken from its slumber on a Reuters exclusive story. The story noted that several national CBs in the Euro area will challenge Draghi’s leadership style on Wednesday. The source of the story noted that the CBs are angered that Draghi set a target for upping the ECB’s balance sheet as well as being secretive in his management style. The market took this story as a hurdle to further ECB easing. EUR/USD spiked up, ran stops above 1.2550 and hit a high of 1.2577. Action then settled quickly and some of those gains were given back after Europe’s close. Some squeeze risk remains as day/week RSIs haven’t confirmed recent lows and the weekly candle has a long lower wick in place. Further unwinding of shorts may push the squeeze until ECB & NFP risk is past. Until then the risk for a run above 1.2645 is extant.
USD/JPY The first post-QQE2 correction in the yen’s slide arrived today, but it was a mixed and muted affair compared to the manic yen selling the previous two sessions. USD/JPY’s ltd trading beyond 114 got some specs taking profits and a few J exporters willing to lob some in given the recent windfall versus their budgets. Hot and real money both took turns at scooping up intraday bargains in the low 113.00s. Even a poor US Trade report failed to have a lasting negative impact. There was a broad USD dip around the 10ET options expiries, but the hourly Cloud top has kept USD/JPY aloft in a tight range since. There was linkage to a Reuters story about ECB disunity, which may have helped, counterintuitively, lift the EUR and EUR/JPY on the fear the ECB will have a harder time getting to QE and rapid balance sheet expansion; a glaring contrast to the BOJ’s QQE2. EUR/JPY is making new post QQE2 highs with little historical resistance until April peak at 143.47. AUD/JPY got RS & techs boosts o/n, but CAD/JPY yen struggled on further carnage in energy prices and a pending double-top by the May highs. Kuroda’s Tokyo speech tonight is the next key event.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ HLFS Unemployment Rate* Q3 f/c 5.4%, 5.6%-prev
• 21:45 NZ HLFS Job Growth QQ* Q3 f/c 0.6%, 0.4%-prev
• 21:45 NZ HLFS Participation Rate* Q3 f/c 69%, 68.9%-prev
• 21:45 NZ Labour Cost Index – QQ* Q3 f/c 0.5%, 0.6%-prev
• 21:45 NZ Labour Cost Index – YY* Q3 f/c 1.9%, 1.8%-prev
• 22:30 AU AIG Services Index Oct 45.4-prev
• 01:45 CN HSBC Services PMI Oct 53.5-prev
Looking Ahead – Events, Other Releases (GMT)
• 02:30 JP BOJ Governor Kuroda Speaks in Tokyo
