Currency Updates:
AUD/USD AUD fell victim to the risk-off sentiment as Europe’s equity markets tanked along with commodities. AUD/USD slide from near 0.8800 towards 0.8685 before it bounced towards 0.8720 ahead of NY’s open. Risk sentiment was still soft and WTI dipped below $80/bbl. This saw early NY push AUD/USD to a new daily low of 0.8666. Buyers emerged though as US econ data was better than forecast. Hourly resistance near 0.7930 was tested. The resistance eventually broke as the Fed’s Bullard stated the Fed could contemplate increasing bond buys while also noting in a BBG interview that the Fed may want to pause taper of QE due to the drop in inflation expectations. AUD/USD rallied to 0.8789 as stocks and commodities put in powerful rallies off their lows. Late in the day the pair sat just above 0.8760 as some of those rallies were given back. No major data or events are scheduled in Asia’s session so AUD traders are likely to take their cues from the stock & commodity markets.
EUR/USD Offers into 1.3850 and Asian sellers in the 1.2860-80 zone had Europe apply bearish pressure to EUR/USD in their morning. With risk sentiment sour on falling equity and commodity prices EUR/USD made a steady move lower and eventually hit a 1.2705 low before bounce near 1.2745 into NY’s open. Early NY saw the pair lift after US econ data was better than f/c that eased some sour risk sentiment. The pair lifted near 1.2780 as EUR/JPY got most of the benefit on its rally from 134.75 to 135.20. EUR/USD then slipped back near 1.2730. the dip was bought as comments from Fed speakers Bullard and Kocherlakota put a bid into risk. Bullard’s comments were the big impact as he noted the Fed could contemplate increasing bond buys depending on data while he also noted the decline in inflation expectations are a serious matter for the Fed. EUR/USD took off as risk assets (stock, commodities) saw big rallies off their lows. A NY high of 1.2840 was hit but the pair then slipped a bit as risk assets gave back some of their rallies. Late in the day the pair sat near 1.2800.A lack of major data in Asia & Europe will have traders focusing on equity & bond markets for cues.
USD/JPY Stronger-than-expected US Claims and IP data gave USD/JPY, and most other yen crosses, a lift up in NorAm trading. The rebound was fairly subdued compared to recent losses, in part because Tsy yields and stocks gain little traction on the news. The IP was less impressive than the headline due to surges in Utilities and Mining, while NAHB and Philly Fed were poor. There is also the matter of what the market wants/fears most at this point. Is good US news good for the USD and bad for the yen because the US could help the rest of the world recover, or is it bad news because it keeps Fed dots in place, risking further financial upheaval. Careful what you wish for. Meanwhile, BOJ’s Kuroda has again voiced his approval of a weaker yen if fundamentals justify it. The angst at the ECB and EU is thickening. USD/JPY has managed to hold above the daily Cloud at 105 that real money and Japanese buyers are reported bid in front of at 105.20-00. But today’s rebound is so far stalled by the o/n & late NY Wed highs in the 106.30s. The crosses all rallied hard on the upbeat US data, but p/t was integral there. N225 by its up TL fm Jun 1’3, last at 14,628.
Looking Ahead – Economic Data (GMT)
• 23:30 JPY Oct Reuters Tankan DI no f/c prev 10.0
• 23:50 JPY Capital flows data w/e Oct 10
Looking Ahead – Events, Other Releases (GMT)
• JPY ASEM holds summit; Prime Minister Abe plans to attend
• JPY BoJ Governor Kuroda gives speech at annual credit union convention
