Currency Updates:
AUD/USD Europe pushed AUD/USD lower from Asia’s high due to offers touted in the 0.8820-50 zone and a bout of USD strength. The pair slide from near 0.8820 & sat near 0.8775 at NY’s open. Early action saw gains as the USD began to weaken. The rise accelerated a bit and hit 0.8806 as US bond yields dropped. That rally was sold though as JPY strength permeated the market. AUD/JPY dropped from above 95.40 towards 94.80. AUD/USD went on to hit a NY low of 0.8765. Buyers emerged though as the USD stayed weak but overall risk sentiment improved as stocks recouped losses and went positive. AUD/USD climbed, broke Asia’s high,pierced the 10-DMA and rallied towards 0.8830 late in the day. The l-t trend for the pair remains down but bears should proceed with caution. The bullish hammer on Oct 1 saw upside follow through today while the day/week RSIs diverge. The bounce off key 0.8660/70 support is also a warning. A further squeeze cannot be ruled out. If NFP is weak tomorrow a test of 0.8950/0.9000 may be due.
EUR/USD Europe held EUR/USD to a relatively tight range as the mkt awaited the ECB decision and Draghi’s presser. NY walked in with the pair near 1.2640. The ECB kept rates unch as expected. EUR/USD lifted a bit after the decision as general USD weakness took hold. The lift accelerated during Draghi’s presser. There was no mention of QE beside that the bank is ready to use it if needed. Draghi did go over some details of the ABS/covered bond buys but wasn’t specific about amounts. He did spend a fair amount of time government fiscal policy and structural reform and pointed out he trust France to take the needed steps for reforms. He also noted that the ECB can’t lower rates any longer. Traders seemed a bit disappointed with Draghi and short covering ensued. A rally to 1.2692 took hold. A bout of JPY strength drove EUR/JPY from 137.63 to 136.86. EUR/USD dipped as well & hit 1.2625 but USD weakness remained the them and the dip was bought. The pair hit a 1.2699 high before it dipped near 1.2980 late in the day. US jobs are the mkt’s next cue.
USD/JPY A retreat in the overbought USD teamed up with a rebound in the oversold JPY to send the pair below last week’s 108.25 low & to a session low of 108.01 before recovering with equities from their lows in the NY afternoon. Heavy fund selling, particularly early and in EUR/JPY, drew USD/JPY lower, but the yen was widely bid after an apparent double-top in the N225 and a 1.9% drop in N225 futures at least glance (well off the day’s worst and roughly -5% on yr). Horrible BOJ Consumer Confidence results for Sep, the drop in the Services Tankan and a recent Rtrs polls showing 75% of Japanese businesses don’t want a weaker yen create a dilemma for the BOJ and Abe, particularly with consumers not seeing the CB reaching its 2% CPI target over the next 3 yrs. Upping QQE now might do more harm than good to the domestic economy, while favoring exporters only to the extent that it inflates overseas earnings. At any rate, USD/JPY’s 109.12 high today was at the just-broken and rolling over Tenkan line. If not retaken and closed above, a break below the 21-DMA by 108 will be next, with pullback targets eyed by 106.80. Big GBP/JPY breakdown brewing.
Looking Ahead – Economic Data (GMT)
• 23:30 AIG Services Index Sep 49.4-prev
• 01:00 HIA New Home Sales m/m Aug -5.7%-prev
• 01:00 NBS Non-Mfg PMI* Sep 54.4-prev
Looking Ahead – Events, Other Releases (GMT)
• No major events scheduled
