Currency Updates:
AUD/USD An bout of JPY strength in early NY saw AUD/USD slip from just above 0.7880, pierce the 200-hour MA and touch a NY low of 0.8758. The dip reversed though as broad USD softness trumped JPY strength. The pair began climbing off the low and took out the overnight highs. A session high of 0.8798 was eventually hit as the USD stayed heavy and risk sentiment was buoyed by rising equity markets. Very little pullback from the high was seen and the pair sat just above 0.8795 late in the day. Traders now turn their attention to the RBA minutes and China econ data. The RBA is likely to harp on AUD strength but this may see only limited pressure applied to AUD as the market is used to hearing that rhetoric from the RBA. The China data is likely to have a bigger impact. Q3 GDP is f/s to slip to 7.2% from 7.5% while Sep retail sales are f/c at 11.8% vs. the prior 11.9%. Should the data see a downside miss AUD should turn heavy. Today’s gains might then be erased and sub-0.8700 levels may be tested ahead of AU Q3 CPI due on Oct 24.
EUR/USD Europe bought the dip presented to them as they walked in the door. General USD weakness saw short covering take the pair form near 1.2735 towards 1.2770 into NY’s open. Early NY saw a spike up to 1.2790 get rebuffed. A bout of JPY strength drove EUR/JPY from near 136.70 to a NY low of 136.27. EUR/USD drifted lower to test hourly support near 1.2750/55. The dip was bought though as USD weakness dominated and improved risk sentiment sent stocks higher. EUR/JPY rallied off its NY low and sat just above 136.80 late in the day. EUR/USD lifted off the NY low, cleared the overnight high and touched 1.2811. Very little pullback was seen and the pair sat just below 1.2810 late in the day. shorts may get squeezed further after the pair bounced nicely off the 10-DMA. Day/week RSIs are biased up and spreads hold near recent tights. If China’s Q3 GDP should see an upside surprise, risk may rally strongly and EUR/USD may get take higher.A test of 1.2900 resistance may then take hold. Should that resistance give way there isn’t much to stop a bigger squeeze until the 1.30 area where the 55-DMA& Sept high sit.
USD/JPY Most of the USD/JPY’s intraday fall from o/n highs came before 8:00 AM ET, with the dollar struggling against most currencies to start the week. The nearly 4% rebound in the N225 o/n left the yen weaker on almost all the major crosses and the N225 futures London pullback was followed by a mild rise on NorAm trading, but falling USD-JPY yield spreads kept USD/JPY heavy, even after the large 10ET expiries between 106.75/90. The 107.39 highs stopped just shy of the Oct 15 breakdown session high, as well as the daily Kijun & 50% of the Oct slide at 107.64. With prices today homing back down to the Tenkan at 106.97 and falling further below the Kijun, the risk is for a test of the daily Cloud top, Tuesday at 105.39. Of course much of the yen’s re-risking dip & the Nikkei’s rise o/n was bolstered by reports GPIF will eventually raise its stock allocation above what most were expecting and that the Abe govt is getting cold feet on raising the VAT again next year. Neither event would be shocking, but neither has been confirmed, and both have potential drawbacks. O/S bounces in the yen crosses look like mean reversions. China data key tonight.
Looking Ahead – Economic Data (GMT)
• 02:00 CN Urban inv (ytd) yy* Sep f/c 16.3%, 16.5%-prev
• 02:00 CN Industrial Output YY* Sep f/c 7.5%, 6.9%-prev
• 02:00 CN Retail Sales YY* Sep f/c 11.8%, 11.9%-prev
• 02:00 CN GDP YY Q3 f/c 7.2%, 7.5%-prev
• 02:00 CN GDP QQ SA Q3 f/c 1.8%, 2%-prev
Looking Ahead – Events, Other Releases (GMT)
• : JP Cabinet Office Monthly Economic Report for October
• 00:30 AU RBA Minutes of Oct. Meeting
