Currency Updates:
AUD/USD JPY cross buys begun in Asia carried over in Europe’s morning. This pushed AUD/USD up from the 0.8820 area towards 0.8840 into NY’s open. Early NY saw leveraged names continue to buy AUD/JPY & keep AUD/USD bid into US data. The big miss on durable goods saw the USD part of the equation take over the lift. US yields and the USD spiraled lower post-data. AUD/USD spiked up, cleared Asian offers at 0.8840/50, ran stops above 0.8860 and hit a 0.8882 high. The USD and yields rebounded after consumer confidence was well above expectations. AUD/USD dipped back to the 0.8840 level but couldn’t break lower. AUD/JPY rallied in NY’s afternoon and neared 95.75. This combined with rallies in US equity markets had AUD/USD sit just above 0.8860 late in the day. Action overnight may be limited as traders are likely to keep their powder dry ahead of the Fed. Should the Fed lean dovish tomorrow we might see AUD/USD break 0.8900. If that occurs it’s possible a s-t bottom is in place and run towards 0.9100 may take hold.
EUR/USD An early rally in Europe was rebuffed after EUR/USD failed to climb above the 200-HMA. The sell-off from the 1.2715/20 area saw 1.2685 hit. A rebound occurred as EUR/JPY lifted off from the 136.95 area. EUR/USD bounced & sat just above 1.2700 into NY’s open and US econ data. Durable goods saw a big miss. US rates and the USD fell broadly. EUR/USD cleared the 200-HMA and ran spec stops just above it. Asian offers in the 1.2735/45 area were well absorbed and the pair went on to hit a 1.2765 high. The pair dived back to the 200-HMA after consumer confidence was solidly above f/c. The dip was bought though as EUR/JPY’s rally was unrelenting on its trip to 137.81 high. EUR/USD bounced back above 1.2740 and spent the remainder of NY range-bound in the 1.2740/55 zone. The market’s focus now shifts to the Fed. Should the Fed acknowledge recent soft US data and lean dovish it’s likely EUR/USD will remain bid as US rates adjust lower. A trip toward 1.2900 and possibly 1.3000 cannot be ruled out at that point.
USD/JPY A soft US Durables report cut the legs out from under USD/JPY’s London session rebound to 108.17, but the 107.69 lows were attractive enough for macros and Japanese buyers given the fairly steady Tsy yields and the option hedging ahead of 1.3bln of 108 expiries at 10ET. Home prices disappointed, but Consumer Confidence was so far above f/c that it forced USD/JPY to retrace nearly all of the early NY slide (the 107.69 low hitting the hourly up TL from the Oct 15 nadir). Now the focus swings back to the FOMC announcement Wed and the BOJ’s on Friday. Policy from both banks is expected to remains unchanged. The BOJ’s semi-annual f/cs are expected to features lower FY ’14 GDP and CPI f/cs, though the BOJ’s FY ’15 2% CPI f/c is expected to stay. Kuroda has noted there is no strict timeframe for the CPI goal, only that it will be met around FY ’15. Strong Sep Japanese Retail Sales may give the BOJ more credibility in their assertion the VAT tax hike impact is waning and growth is picking up again. 106.70-107.40 is the near-term USD/JPY range. EUR/JPY is right on the 50% Fibo & weekly Tenkan at 137.68 into close. Crosses rise w stocks & commodities.
Looking Ahead – Economic Data (GMT)
• 19:50 JP Industrial output prelim mm Sep f/c 2.2, -1.9-prev
• 19:50 JP IP Forecast 1 Mth Ahead* Sep 6-prev
• 19:50 JP IP Forecast 2 Mth Ahead* Sep -0.2-prev
• 20:00 NZ NBNZ Business Outlook Oct 13.4-prev
• 20:00 NZ NBNZ Own Activity Oct 37-prev
Looking Ahead – Events, Other Releases (GMT)
• No Significant Events
