Currency Updates:
AUD/USD Europe added to Asia’s gains. The pair was pushed up near the 0.8900 level as the USD and US bond yields were generally soft. The rally stalled though as the USD slide halted. AUD/USD slid from the 0.8899 high & sat near 0.8875 into NY’s open. The USD began a recovery as USD/JPY made a nice bounce off 107.50. AUD/USD steadily slid lower and paused near 0.8835. The slide accelerated and cleared the post-Oz jobs data dip after US bond yields recovered, JPY strength emerged while oil & equity markets were hit hard. The slide stalled just short of the 200-HMA as it made a NY low of 0.8765. Very little bounce was seen though and the pair sat just above the 10-DMA (0.8764) late in the day. The short squeeze may have run out of gas. After making a new s-t trend high the pair closes the day down and daily RSI rolls over. A clean break of the 10-DMA and daily lows of Oct 7 & 8 should see recent longs exit. The 2014 lows are then back in play.
EUR/USD Persistent USD weakness in Europe’s morning saw Asia’s gains added to. EUR/USD rallied to a 1.2791 high before dipping near 1.2760 into NY’s open. The USD recovered after USD/JPY failed to clear 107.50 and US bond yields took back early losses. EUR/USD slid from the NY open and never looked back. The pair tested support near 1.2710 before a slight bounce took hold. Germany’s Schaeuble hit the wires noting that ‘if we don’t stick to the EU budget rules, monetary union doesn’t work.’ He also noted that the European situation will change when France & Italy implement structural reforms. Draghi then spoke. He noted reform is needed & Gov’ts with the fiscal space should use it. EUR/USD slid on these remarks. The slide gathered pace as JPY strength drove EUR/JPY through 137.30/35 to an eventual low of 136.66. EUR/USD follwed & hit a low of 1.2664 before bouncing back near 1.2685 late in the day. The 10-DMA and Oct 8 low are s-t support. Breaks of them may mean the short squeeze is over. A return the 1.25 may then occur.
USD/JPY USD-JPY 2-yr yield spreads fell today to their lowest since Aug 21, while the N225 futures tumbled to Aug 18 lows. USD/JPY closed those two days at 103.84 and 102.56, respectively. That today’s range was 107.53-108.32 indicates just how much the continuing divergence between rapid BOJ balance sheet growth and Fed’s tapering end is keeping prices aloft. Today’s high was 2 tics below the up TL from Aug that was broken below on Tuesday and prices are threatening to close below 108 finally. The Tenkan at 107.39 and the 3-yards of 107.50 expiries for Friday have yet to come into play. With enough pressure from a falling Nikkei, those supports will be removed. A double-top in the N225 and an Island top in the TOPIX add to the bearish view there. N225 futures are down by the daily Cloud base & up TL off the May-Aug lows, with the 200-DMA not far below at 15,140. AUD/JPY has pierced its 200-DMA for the first time since overtaking it in March. All the yen crosses are heavy amid derisking/yen short-covering. BOJ’s Kuroda kept the door open to QQE2, but remains unmoved to adjust at this stage.
Looking Ahead – Economic Data (GMT)
• : NZD Sep REINZ House Price Index m/m no f/ prev 1.06%
• : NZD Sep REINZ HPI year ago no f/c prev 4.8%
• 23:50 JPY Sep Bank lending no f/c prev 2.2%
• 00:30 AUD Aug Housing Finance f/c 0.10% prev 0.30%
• 00:30 AUD Aug Investment Housing Finance no f/c prev 6.8%
• 02:00 CNY Sep M2 money supply y/y f/c 12.9% prev 12.8%
• 02:00 CNY Sep New Yuan loans f/c CNY735b prev CNY702.5b
• 02:00 CNY Sep Outstanding loan growth f/c 13.2% prev 13.3%
• 05:00 Sep Consumer Confidence Index no f/c prev 41.2
Looking Ahead – Events, Other Releases (GMT)
• 23:50 JPY BoJ Monetary Policy Meeting Minutes
• 01:45 AUD RBA Assistant Gov Edey speech at FINSIA Conference
• G20 Meeting continues
