Currency Updates:
U.S. Dollar Trading (USD) some negativity entered the market overnight with FOMC member Bullard throwing cold water on QE3 optimism saying that data since the FOMC minutes had improved and that the minutes were ‘a bit stale’. Stocks reacted negatively and the USD gained against risk currencies. Weekly Jobless Claims crept higher but this was countered by stronger than forecast August manufacturing PMI and July New Home Sales. Looking ahead, July Durable Goods Orders forecast at 2.4% vs. 1.3%.
The Euro (EUR) the EUR/USD hit fresh highs intraday as crosses continued to be unwound especially against the AUD. The EUR/AUD has risen from all-time lows near 1.1600 to above 1.2000 overnight as traders take profit and bet on the survival of the Euro. There are very important meetings going on at the moment with France/Germany and Greece. Greece is hoping for more lenient loan measures but Merkal and Hollande will likely wait for the Troika report before announcing any adjustments. The other main story out of Europe is talk that Spain is discussing terms of aid with the Eurozone.
The Japanese Yen (JPY) the USD/JPY consolidated the losses from the Dovish FOMC minutes and settled near Y78.50 in quiet trade. EUR/JPY buying is supporting but the AUD/JPY is hurting as risk aversion due to the US stock slide overnight sparked some heavy selling.
The Sterling (GBP) resistance was seen above 1.5900 and a larger pullback was seen with US stocks than with the Euro as the Pound is a more risk sensitive currency. Support was found under 1.5850 and the GBP/USD been very quiet so far in Asian trade Friday with uncertainty evident as for its next direction. Looking ahead, Q2 GDP forecast at -0.5% vs. -0.7% previously.
Australian Dollar (AUD) the Aussie was hammered lower immediately after the weak Chinese HSBC PMI slumped to 9 month lows at 47.3 in August. The selling continued in Europe and the US sessions with the China bear story now undermining the AUD support base.
Oil & Gold (XAU) Gold kicked higher in relentless one way buying overnight with little pullbacks so far in the recent rally. Technical’s are overbought but selling is extremely dangerous as gold can overextend in dramatic fashion once a new trend emerges. OIL/USD finally reversed as US stocks prompted aggressive profit taking in the energy from $98 back to $95. The uptrend could be tested as US stocks potentially head for a correction lower.
