Currency Updates:
AUD/USD Europe nailed AUD/USD in their morning on a combination of effects. Concerns over China growth, soft commodities and an SMH report having Roubini Economics warning of a 20% drop for AUD saw the pair shoved down from above 0.8940 towards 0.8865 before a bounce had it near 0.8885 at NY’s open. Bears pressed their case further in NY as commodities stayed heavy & global bond yields slid. NY took the pair to a new trend low of 0.8851. Bids touted at 0.8850 halted the slide and a bout of USD weakness allowed for a bounce. Late in the day the pair sat near 0.8870. The bear trend remains but the 76.4 Fib of 0.8660-0.9505 is a hurdle that needs to be overcome. A close below it will bolster a bear outlook as narrowing yield spreads and downward biased day/week RSIs currently do. A close below that Fib and a 0.8850 break likely see bear pressure increase. The 2014 low will then be bears next major target.
EUR/USD Europe capped the rally begun in Asia just short of 1.2870. they pushed the pair below 1.2835 before it bounced near 1.2840 into NY’s open. NY pushed the pair briefly above 1.2855 a US bond yields were soft early but leveraged sellers sat there and capped the rally. Draghi’s statement to the Committee on Economic & Monetary Affairs of the EP was dovish. He noted that the ‘economic recovery in the Euro area is losing momentum’-DJN while also noting that ‘the exchange rate isn’t a policy target, but it’s very important for price stability’-RTRS. EUR/USD dived to a new trend low of 1.2816. Bids into the 1.2800 barrier prevented further losses and the pair then bounced as NY’s afternoon saw some USD weakness. Late in the session the pair sat just below 1.2840 and up near 0.10% for the day. Risks for a short squeeze are upped after the new low was set and the pair then closing up on the day. Bolstering the view of upped squeeze risks are diverging daily & weekly RSIs and narrowing yield spreads. Unless the pair can crack 1.2800 soon we may see s-t bears cover and the pair take a look near 1.3000.
USD/JPY Consolidation of the USD/JPY uptrend was reinforced by the broader risk-off start to the new week that pushed equities and Tsy yields lower. The 108.67-109.20 range fell within Friday’s wide, thus averting a simple daily pivot pt reversal below last Thur’s 108.32 low. Dudley’s comments downplaying the Fed’s dots and much-weaker-than-f/c US Existing Home Sales also dampened dollar demand. Though the yen is indisputably overdue for a technical rebound, the M-T macro view remains quite bearish. In all likelihood, PM Abe will go ahead w next year’s consumption tax hike, despite weaker-than-expected growth and inflation this year, which will place more pressure on the BOJ to up QQE, while GPIF does its part by selling JGBs and buying stocks and foreign assets. A holiday Tues in Japan should keep dealings light tonight. EUR/JPY took its cue from sinking stocks and Draghi’s latest promise to use unconventional tools to fight increasing downside risks to the region’s economy. Still holding the weekly Kijun at 139.60 and the broken dn TL fm ’13 highs at 139.52 at this writing. EM/commodity crosses getting hit as China woes spread. JPY CPI on Friday.
Looking Ahead – Economic Data (GMT)
• 01:45 CN HSBC Mfg PMI Flash Sep f/c 50, 50.2-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
