Currency Updates:
U.S. Dollar Trading (USD) demand for safe haven assets helped the Dollar gain across the board with EUR/USD falling below 1.3000 and USD/JPY testing Y80 both key levels. The lack of bounce from the large sell off on Friday makes this move lower potentially dangerous technically. Company earnings from the US are weighing with cautious outlooks. Looking ahead, FED FOMC Meeting forecast to hold at 0.25% but focus will be on the statement accompanying the decision.
The Euro (EUR) the EUR/USD was under pressure with Spanish Yields increasing again. The lack of clarity or timetable is weighing on sentiment with investors hoping Spain will apply for access to the OMT. The market could force Spain via a sharp spike on Bond Yields. Greece is also weighing with talk the Greek opposition will not agree to proposed labor reforms.
The Japanese Yen (JPY) USD/JPY tested Y80 but large offers have capped so far and some risk aversion later weighed via the Yen crosses. AUD/JPY and GBP/JPY were the weakest falling sharply from recent highs. The outlook is still positive as the market prices in more aggressive monetary policy from the BOJ.
The Sterling (GBP) the risk sensitive pound was already on the back foot yesterday before US stock losses and we broke 1.6000 support convincingly now. BOE Governor King spoke yesterday about the banks QE program and would be ready to inject more if the economic recovery falters. EUR/GBP in edging higher at 0.8140 and could enter an uptrend if the GBP/USD continues to slide. Looking ahead, October German Flash Manufacturing PMI forecast at 48 vs. 27.4 previously. Also ECB President Trichet Speaks to German Parliament.
Australian Dollar (AUD) support at 1.0300 was broken we fell down to 1.0250 in the US session with the bears in control. The RBA is expected to cut rates but this will be greatly impacted by the inflation numbers that we see for the Q3 today. The other main risk event is the Chinese PMI which may give an indication of the pace of the Chinese economy. Looking ahead, Q3 Australian CPI forecast at 1.1% vs. 0.5% previously Q/Q and 1.6% vs. 1.1% previously Y/Y.
Oil & Gold (XAU) Gold failed at the $1730 level and fell sharply to the $1700 level before bouncing back in Asia so far to $1710. The FOMC is critical for Gold’s next move. OIL/USD led the market lower with some traders now looking to Oil as a forward indicator for the rest of the market next direction.
