Currency Updates:
AUD/USD The combination of China’s coal tariffs, soft Oz investment housing finance and a general risk-off theme saw Europe smash AUD/USD lower. Bears drove the pair towards 0.8725 into NY’s open. Commodity prices and equity futures were all in negative territory as NY got going so bears pressed the pair further. The pair sliced through s-t profit taking bids ahead of 0.8700 and hit a NY low of 0.8687. A bounce towards 0.8730 then took hold as the USD softened while stocks & commodities rallied a bit. The bounce was sold though as the pair sat near 0.8710 late in the day. The pair’s inability to clear 0.8900 resistance and slide back below the 10-DMA combine with a long upper wick on the weekly candle to put a bearish outlook back in play. Day/week RSIs are biased down again and yield spreads remain near recent tights. The pair will need a serious rebound in risk sentiment if it wants to rally. If not the 2014 low should be tested. A break of that low likely accelerates the l-t slide and the door to the May 2010 low opens wider.
EUR/USD The pair’s failure to clear s-t resistance near 1.2720/30 gave Europe an excuse to sell EUR. sour risk sentiment and a firm JPY were added reasons. Bears sold EUR/USD from near 1.2715 towards 1.2650 before a bounce had it near 1.2670 into NY’s open. Collapsing oil prices and increased risk-off sentiment, driven by soft equity mkts, saw NY push EUR/USD down further. The pair dived to a 1.2609 low. A turn in sentiment and some softening for the USD allowed the pair to lift to 1.2645 into the 10:00 am options expiry where large 1.2650 & 1.2625 XXX’s sat. The rally was snuffed out though as Draghi hit the wires. He reiterated that econ outlooks remain on the downside while also noting that risks to inflation’s outlook will need close monitoring. The pair approached the day’s low but couldn’t match it. Late in the day the pair sat just above 1.2615. Bears assert themselves again as the pair slips below the 10-DMA again. A test of 1.2500 may be due next week. EZ Sept. CPIs & German Oct ZEW are out next week. Soft results should pressure EUR lower & possibly see 1.2500 break. If 1.25 is cleared l-t bears eye roughly 1.2050.
USD/JPY A bit of calm returned on Friday after Thursday’s somewhat angst-ridden asset liquidations that lifted the yen broadly, but far more so on the crosses. As a result, USD/JPY prices managed to tuck themselves inside Thursday’s fairly modest range, while leaving untouched nearly 3bln of 107.50 expires and the stops below the daily Tenkan at 107.39. There was some paring of losses in USD-JPY yield spreads from o/n lows, but Nikkei futures remain near their lows as the NorAm session starts to wind down. EUR/JPY, on the other hand, is making new intraday and Oct lows as we write, with the Sep low at 135.82 now nearby. Despite Eurogroup chairman Dijsselbloem mooting a more coordinated approach to reviving economic growth potential, few see a workable plan coming together quickly enough to right that listing ship, nor is the ECB’s ABS/CB plan seen as a game-changer. EUR/JPY is flirting with its weekly Cloud base at 135.31 with the Tenkan & Kijun bearishly aligned above. AUD/JPY is now well below its 200-DMA looking even gloomier after China slapped trade tariffs on coal imports. GBP/JPY eyes last month’s lows.
Looking Ahead – Economic Data (GMT)
• 21:45 NZD Sep food Price Index no f/c prev 0.31%
• 02:00 CNY Sep Trade Balance f/c USD$41b prev 49.8b
• 02:00 CNY Sep Imports y/y f/c -2.7% prev -2.4%
• 02:00 CNY Sep Exports y/y f/c 11.8% prev 9.4%
Looking Ahead – Events, Other Releases (GMT)
• IMF Meeting Sat & Sun
• Oct 11 USD Fed’s
• CAD Thanksgiving Holiday
• JPY Health-Sports Day Holiday
