Global Markets:

  • Asian stock markets: Nikkei down 2.10 %, ASX fell 0.70 %, Shanghai and Hong Kong are closed for a holiday
  • Commodities: Gold at $1220 (+0.40 %), Silver at $17.29 (+0.20 %), Crude Oil at $90.72 (unch)
  • Rates: US 10 year yield at 2.40

News & Data:

  • Australia Building Approvals 3.0 %, Expected: 1.0 %, Previous: 2.1 %
  • Australia Trade Balance A$-0.79bln, Expected: A$-0.70bln, Previous: A$-1.08bln
  • New Zealand ANZ Commodity Price Index -1.3 %, Previous: -3.3 %
  • SNB Chairman Jordan says the EURCHF exchange rate is credible, current situation not comparable to Summer of 2012
  • RBA: House prices have risen significantly faster than incomes, targeted assistance can help first-home buyers
  • Japan PM Abe: Will continue to manage GPIF safely, efficiently, and with a long-term view

FX Overview:

The sharp decline in US yields put the USD/JPY under pressure in yesterday’s NY trading session and the pair closed the day below 109.00. Dealers saw position covering from leveraged names, as well as fresh selling from fast money names. Positioning remains stretched and many see a dip towards 105.00 possible should NFP data tomorrow disappoint. There are plenty of trailing stops resting below 108.00 and it wouldn’t take too much to trigger a larger round of position liquidation. Until NFP, dealers expect that USD/JPY will find decent support around 108.20, while 109.50 is now the key intraday resistance. Fading either side of that range ahead of the data release seems likely the appropriate strategy.

EUR/USD has recovered somewhat amid broad USD weakness and is likely to consolidate in a tight range ahead of the ECB, as usual. The depreciation of the Euro continues, but the latest inflation print was again low and Draghi will very likely face again questions about a possible QE programme and what could trigger it.  1.2580 and 1.2760 are the two key levels to watch on both sides. Intraday, dealers report bids at 1.2620, while offers resting pre-1.27. Stops in good size noted through 1.2710.

The commodity currencies benefited from the USD weakness. AUD/USD bounced off the yearly low support at 0.8660 and has rallied above 0.88. The topside will likely be capped around 0.8850 ahead of the NFP, but given the crowded positioning, a weak NFP could pave the way for a 0.90 test. To the downside, key support now lies at 0.8750. USD/CAD declined to 1.1068 overnight. Expect decent support in the 1.1020-30 area.

Upcoming Events:

  • 08:30 GMT – UK Construction PMI (63.5)
  • 09:00 GMT – Euro Zone PPI (-0.2 % MoM, -1.2 % YoY)
  • 11:45 GMT – ECB Rate Decision (0.05 %)
  • 12:30 GMT – US Initial Jobless Claims (298k)
  • 14:00 GMT – US Factory Orders (-9.3 % MoM)