Currency Updates:
AUD/USD Europe erased all of Asia’s gains after the RBA’s Steven’s warned AUD investors they underestimate the risks of an AUD decline. A quick spike lower halted at the 200-HMA which sat 0.8682 at the time. A quick rebound saw the pair back near 0.8710 after the USD softened in early NY. The pair then saw a steady ascent. The lift got an added boost from a spike up in AUD/NZD after a weak Fonterra milk auction. The lift eventually hit a NY high of 0.8735 and the pair sat just below that level late in the day. Westpac Oct Leading index and the BoJ are the main risks overnight but traders might looks to commodities for cues. Iron ore and rebar have hit new trend lows are could have AUD bulls on edge. An acceleration to the downside for those commodities is likely to keep any future AUD/USD enthusiasm tempered.
EUR/USD Europe lifted the pair towards the 1.2540 area as USD longs lightened up after USD/JPY couldn’t break the 2014 high. A slight dip saw the pair near 1.2500 into NY’s open. The dip was bought as the USD’s weakness continued and US bond yields slipped a bit. The pair again lifted towards the overnight high but couldn’t break it. The USD recovered and JPY weakened to send EUR/JPY back above 146.50. This saw EUR/USD torn between a rising USD and rising EUR/JPY. The pair ranged 1.2502/1.2532 for a while before eventually making a marginal new high at 1.2545. Little pullback from the high was seen as EUR stayed firm against most major currencies even as EUR/CHF hovered near recent lows. Late in the day EUR/USD sat just above 1.2535. There is little data out of the EZ to drive price action so traders are likely to look to the BoJ and FOMC minutes for their cues. EUR/USD activity may be light until then.
USD/JPY With the snap election and VAT rise delay behind us, the focus is on tonight’s BOJ meeting. While the Oct 31 QQE2 launch now looks even more appropriate due to the lousy Q3 GDP report, the committee might feel somewhat double-crossed by the VAT hike’s 18-mo delay, as many saw QQE2 as a quid pro quo for next year’s hike. This will make the spilt on tonight’s vote to retain the freshly-minted QQE2 interesting. The market clearly expects QQE2 to persist, otherwise the yen would not have weakened across-the-board today, even vs the USD, which came in for profit-taking led by EUR short-covering. A double-top by 117.06 this week gives techs some cause for pause, but the pullback from there was muted. Though US PPI & NAHB were above-f/c, this didn’t help Tsy yields or the USD much. Decent bids noted 116.35-25 (latter the hourly Cloud base), but 115.45 is the daily on-close pivot pt from Monday’s low. The pivot pts have held since the Oct 15 nadir. More talk about QE from the ECB today after a surprise rebound in the ZEW o/n squeezed EUR/JPY to a new trend high of 146.69. Fibo-projected top at 147. New GPIF CIO well received.
Looking Ahead – Economic Data (GMT)
• 21:45 NZ Producer Prices QQ* Q3 -1%-prev
• 21:45 NZ PPI Output* Q3 -0.5%-prev
• 04:30 JP All Ind Act IDX (MoM) Sep f/c 1.2%, -0.1%-prev
• 05:00 JP Leading Index Sep f/c 105.6, 105.6-prev
Looking Ahead – Events, Other Releases (GMT)
• : JP Interest Rate Decision f/c 0.10%, 0.10%-prev
• : JP Bank of Japan Monetary policy statement
• 07:30 JP BoJ Press Conference
