Global Markets: 

  • Asian stock markets: Nikkei down 0.35 %, Hang Seng up 0.50 %, ASX declined 0.55 %, Shanghai closed
  • Commodities: Gold at $1205 (-0.20 %), Silver at $17.30 (+0.40 %), Crude Oil at $90.25 (-0.10 %)
  • Rates: US 10 year yield at 2.43, German 10 year yield at 0.90, UK 10 year yield at 2.34 

News & Data: 

  • Australia AIG Construction Index 59.1, Previous: 55.0
  • Reserve Bank of Australia leaves the key rate unchanged at 2.50 %
  • RBA: Prudent to have period of stability for rates
  • RBA: AUD remains high by historical standards
  • RBA: Commodity prices important to Australia, have declined further in recent months
  • RBA: Most data consistent with moderate growth in economy
  • New Zealand FinMin English: Return to budget surplus next year uncertain; NZD level a challenge for exporters; dairy prices fell faster than expected
  • Fed’s George: Most FOMC participants expect rates should rise in 2015, important to start normalizing rates sooner than later
  • Japan PM Abe: Wants to study 3Q GDP data before making another sales-tax increase decision
  • Bank of Japan Governor Kuroda: Weak Yen pushes down profits for non-manufacturing firms but isn’t an overall minus for Japan’s economy
  • Kuroda: Central bank will expand stimulus measures if downside risks materialize
  • Kuroda: Weak Yen a plus if it reflects economic fundamentals, benefits exports and global companies. Will closely monitor FX moves.
  • Kuroda: Impact of the sales tax increase has been somewhat prolonged 

FX Overview: 

Asian equity markets are up on the day and commodities have been recovering during the past 24 hours, driven by the sudden decline in the USD yesterday. Weak USD longs got squeezed out yesterday and dealers saw a fair amount of stops cleared in EUR/USD and USD/JPY.

The RBA left the key rate unchanged as expected and there were no surprises in the statement either. A few participants were expecting that the RBA will use the current market environment to talk the AUD lower more aggressively, as the RBNZ did recently, but the bank used pretty much the same language as it did in the past few months. AUD/USD didn’t move much after the release, but it now trading slightly higher into the European open. Bids are said to be solid at 0.8725 and towards 0.87, with larger stops resting through 0.8690. To the topside, 0.8820 is the key short-term resistance level. AUD/NZD broke above 1.12 again, but is struggling with 1.1230 resistance. Further consolidation between 1.1150 and 1.1250 seems likely in the near-term.

Meanwhile, NZD/USD saw some heavy selling from leveraged names around the Tokyo open, driving it to a low of 0.7780. A daily close above 0.7865 resistance would suggest a double bottom has formed at 0.7710, with that level being the September 29th and October 06th low. Price action looks bearish in USD/CAD as well, with the 1.11 level barely holding yesterday. The pair bounced from there, but further losses seem likely in the near-term. Solid selling interest noted at 1.12, while bids are reported at 1.1110 and in better size towards 1.1070.

USD/JPY reached a low of 108.65 overnight. Tokyo saw the usual local names buying the pair, but leveraged names remain more cautious. Techs suggest we could see a deeper retracement soon. 108.00 is the key level to watch to the downside, with plenty of stops resting beneath. To the topside, offers at 109.30 and in better size pre-109.50. 

Upcoming Events: 

  • 06:00 GMT – German Industrial Production (-1.5 %)
  • 06:30 GMT – Bank of Japan Press Conference
  • 07:15 GMT – Swiss Retail Sales (0.7 %)
  • 07:15 GMT – Swiss CPI (0.2 % MoM, 0.0 % YoY)
  • 08:30 GMT – UK Manufacturing Production (0.1 % MoM, 3.4 % YoY)
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  • 12:30 GMT – Canadian Building Permits (-8.0 % MoM)
  • 14:00 GMT – US JOLTs Job Openings (4.71mln)
  • 17:20 GMT – FOMC Member Kocherlakota speaks
  • 19:00 GMT – FOMC Member Dudley speaks