Currency Updates:
AUD/USD Two attempts in Europe’s morning to clear the 0.8930 were made after China’s PMI beat forecasts. The attempts failed though. An abatement of USD weakness and offers touted in the 0.8930/50 area capped the pair at 0.8927. The effects of China’ PMI beat began wearing off and the pair slid to sit near 0.8915 at NY’s open. NY applied bear pressure as commodities and commodity currencies were generally offered while the USD rebound persisted. The slide cleared the 0.8850 barrier even as US bond yields were heavy. Spec stops were run and the pair hit a new trend low of 0.8831. Very little bounce was seen & the pair sat near 0.8840 late in the day. There is no major OZ data due that would aid to stem the slide so technicals and USD interest are the likely drivers for the pair. Day/week RSIs are o/s but maintain a bear bias and the pair is pulling away from the 76.4 Fib of 0.8660-0.9505. Narrowing yield spreads are adding weight as well. The pair looks set to test levels from Feb 4 which is the date Stevens dropped the easing bias. The low that day was 0.8730. Below that targets 0.8660.
EUR/USD Shorts were squeezed in Europe’s morning as the USD and US yields were generally soft. the pair bounced off hourly support near 1.2840 and touched 1.2901 just as NY got going. The USD’s slide abated even as US bond yields remained heavy. EUR/USD began sliding as broad based USD strength trumped the weaker bond yields. MNI headlines quoting economists from the SF Fed saying there is a ‘sizeable wedge’ between FOMC & market expectations for rates aided to accelerate the slide a bit. US Sep Mfg-PMI came in slightly below estimates but wasn’t enough to stem the pair’s slide. NY near the overnight low but couldn’t manage further losses and the USD’s rally halted. A slight bounce in the afternoon saw the pair near 1.2855 late in the day. Traders now look to Germany’s Sep IFO release for their next cue. A soft result likely sees more EUR/USD losses and the pair retest the 1.2800 barrier. Large 1.2850 expiries for Wednesday may temper bears but if the barrier is cleared a quick move to key support near 1.2740/50 may ensue.
USD/JPY There was a broad USD hiccup o/n on word of extensive US-led bombing of IS in Syria, but the drop in USD/JPY was scooped up by funds after stops below the preceding two days’ lows were run. The 108.25 session low pierced the Sep 18 low and daily on-close pivot pt at 108.32, but a close below was never much of a danger, as prices surged to 109 in NorAm trading. The risk-off flows out of equities, EM, commodity ccys and the like, plus and a drop in USD-JPY 2-yr spreads ahead of today’s 2-yr Tsy auction (solid indirect bidders) kept the 109 hurdle intact in the afternoon, though it’s right below there at this writing. Fed’s Bullard struck his usual hawkish tone, while Kocherlakota his dovish one. A SF Fed research piece from earlier this month & Hilsenrath’s latest tended to cancel each other out. The bottom line is that most believe the Fed will be able to raise rates next year, even if perhaps less than the dots would suggest, while almost nobody thinks the BOJ will back off their massive QQE next year unless the yen goes into a tailspin. Thus, 109.50 and 110 barriers remain fruit to be picked. EUR/JPY held its weekly Cloud top at 139.21 & daily pivot at 139.15.
Looking Ahead – Economic Data (GMT)
• 22:45 NZ Trade – Imports* Aug f/c 4.45b, 4.39b-prev
• 22:45 NZ Trade Balance MM* Aug f/c -1275.0m, -692.0m-prev
• 22:45 NZ Trade Balance YY* Aug f/c 1.22b, 1.29b-prev
• 22:45 NZ Trade – Exports* Aug f/c 3.15b, 3.70b-prev
• 00:00 AU Conf Bd Leading Idx Jul 0.4%-prev
• 01:00 AU Skilled Vacancies MM Aug 0.90%-prev
• 01:35 JP Markit/JMMA Mfg Sep 52.2-prev
Looking Ahead – Events, Other Releases (GMT)
• 01:30 AU RBA Stability Review
