Currency Updates:
AUD/USD The pair saw a steady ascent in Europe as the USD and US bond yields were on the soft side. A rally from the 0.8685 area took hold and 0.8730 was approached. The pair then dipped towards 0.8705 into NY’s open. The dip found buyers and the ascent resumed. Buying increased as a wave of USD sales entered the market in Europe’s close. AUD/USD cleared hourly resistance near 0.8735, pierced the 21-DMA and neared 0.8745/50. Little pullback was seen as shorts may be looking to cover still with techs suggesting the squeeze has further to run. Daily RSI is biased up and the pair is holding nicely above the 10-DMA. A hold above the 21-DMA targets 0.8765/70 resistance (series of daily lows/highs, 61.8 Fib of 0.8912-0.8540). A break eyes the October high. If that’s cleared a s-t bottom might be in place.
EUR/USD The pair was buffeted in the 1.2430/1.2498 range as action in EUR/JPY and EUR/GBP drove the pair.EUR/JPY’s descent initially dragged the pair lower but EUR/GBP’s lift post-BoE QIR saw the upper limit of the range tested. The pair sat near the mid-point of the range as NY got going. Numerous tries to take EUR/USD higher were thwarted as solid offers into 1.2500 capped. Market speculation that a CB buying EUR/CHF was unloading the EUR vs. the USD. This saw the pair slip back near 1.2450. A bounce off that area was rejected and the overnight lows neared again after ECB’s Weidmann noted an expansive monetary policy is appropriate and so is the GCs discussion of additional measures. We saw fresh EUR/USD session lows after DJN reiterated earlier headlines that NATO says Russian convoys have been crossing the Ukraine border raising risks of new sanctions. A break lower will put 1.2240/95 support in play followed by the July 2012 low at 1.2042.
USD/JPY Yet another USD/JPY pullback was bought into by NorAm and late London participants, this time after a brief dip below 115. A nasty setback in GBP/JPY following the lower BOE inflation outlook may have had some crossover into the other yen pairings, particularly EUR/JPY. Risk appetites rebounded in NY, despite reports of increasing Russian troop movements into Ukraine and ECB’s Weidmann again disparaging outright QE, while paying lip service to balance sheet expansion otherwise. On the Japanese front, reports have come far and wide about Abe calling for a snap election next month and possibly delaying the next VAT rise. QQE2 and the GPIF reallocation remain ambient yen negatives, regardless of the election timing or the VAT hike, which most expect to be resolved after Monday’s GDP release. Unease before then, and amid a slew of Japan data tonight, may temper the USD/JPY’s rise somewhat, but there is no sign of a top yet and most are looking for 118 as the next objective. Also tonight we get the latest weekly Japanese investment flows, with more hints at the pace of GPIF reallocation.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ Manufacturing PMI* Oct 58.1-prev
• 21:45 NZ Food Price Index* Oct -0.80%-prev
• 23:30 JP Reuters Tankan DI Nov 8-prev
• 23:50 JP Foreign Bond Investment w/e 806.6b-prev
• 23:50 JP Foreign Invest JP Stock w/e 904.7b-prev
• 23:50 JP Corp Goods Price MM* Oct f/c -0.4%, -0.10%-prev
• 23:50 JP Corp Goods Price YY* Oct f/c 3.3%, 3.50%-prev
• 23:50 JP Machinery Orders MM* Sep f/c -1.9%, 4.70%-prev
• 23:50 JP Machinery Orders YY* Sep f/c -1.3%, -3.30%-prev
• 05:30 CN Urban inv (ytd) yy* Oct f/c 15.9%, 16.10%-prev
• 05:30 CN Industrial Output YY* Oct f/c 8%, 8.00%-prev
• 05:30 CN Retail Sales YY* Oct f/c 11.6%, 11.60%-prev
Looking Ahead – Events, Other Releases (GMT)
• 23:10 No Significant Events
