Currency Updates:
AUD/USD Europe played both sides of the 200-HMA in their morning. a late morning push off improved risk sentiment had it near 0.8790 into NY’s open. News that the PBOC will inject 200bln Yuan of 3-mo loans to 5 or 6 Chinese banks put a bid into AUD/ AUD/USD spiked up to a 0.8812 high. The gains were fleeting though and the spike quickly reversed. The USD was firm as US bond yields rallied. this aided to reverse the gains. The USD lift persisted and AUD/USD slid back below the 200-HMA to hit a NY low of 0.8745. Action then settled quickly as the market licked its wounds from action earlier in the week. Late in the day the pair lifted a bit and sat near 0.8760. Traders may see the recent 0.8640/0.8900 range extremes get tested next week. Australia see the RBA minutes and Q3 CPI while China gives us Q3 GDP and Oct HSBC Flash Mfg-PMI. Should the econ data come in weak, AUD/USD is likely to test the 2014 low again. A break of that low puts the May 2010 low near 0.8065 in play.
EUR/USD Europe pushed EUR/USD to 1.2840/50 resistance in their morning as it followed EUR/JPY’s spike from near 135.75 to 13.71 due to improved risk sentiment. A slight pullback from the resistance zone saw the pair near 1.2810 at NY’s open. NY made another try at the resistance as risk rallied on the China headlines. The attempt failed though and EUR/USD gave back all the early NY gains and then some. The pair broke hourly support near 1.2780 and eventually hit a low of 1.2744. Activity settled quickly then as the market was likely exhausted from whippy action earlier in the week. A slight bounce had EUR/USD just above 1.2760 late in the day. Action may be limited in the early part of next week as there is no major data due. The second half of the week may see things heat up though as the US releases CPI on Wednesday. Several EZ nations then release Sep & Oct Markit services & manufacturing PMIs on Thursday. Weak results from the EZ data likely puts pressure on EUR/USD. A return to the 1.2600 area may then be due. Should the data come in above f/c 1.2900 might break and key resistance near 1.3000 might be tested.
USD/JPY The N225’s vast under-performance vs the S&P 500 has continued at week’s end, despite the rebound in USD-JPY yield spreads, which leaves the USD/JPY recovery on somewhat shaky ground. The inability to offer USD/JPY below 105, the then daily Cloud top, has allowed prices to rebound with aberrantly low Tsy yields, but prices will need the N225 to eventually joined the yield spread rebound to keep them rising. The risk is that the daily Kijun and 50% of this month’s slide at 107.64 will cap this recovery and the Cloud will come in for a second test. Today’s TR/UM Confidence report gives the USD rebound some credibility, but back-tracking on potential rate hikes next year from some Fed members has to be factored in. On the Japanese side, a failed T-bill buying operation today suggested one of the reasons the BOJ has been adamant about not upping its QE, despite slow reflation progress and post-tax-hike economic weakening, is that the current buying is already bumping into deployment boundaries. Nikkei reported Abe’s new Ind Min, Obuchi, is under investigation for funding irregularities. Abe’s 3rd arrow political capital may be diminishing
Looking Ahead – Economic Data (GMT)
• 23:01 GBP Oct Rightmove House Price Index y/y no f/c prior 7.9%
• 23:01 GBP Oct Rightmove House Price Index m/m no f/c prior 0.9%
• 05:00 JPY Aug Coincident Index no f/c prior 109.9
• 05:00 JPY Aug Leading Economic Index no f/c prior 105.4
Looking Ahead – Events, Other Releases (GMT)
• JPY BoJ holds quarterly meeting with branch managers
