Global Markets: 

  • Asian stock markets: Nikkei down 0.50 %, Shanghai Composite declined 0.60 %, Hang Seng gained 1 %, ASX rallied 1.10 %
  • Commodities: Gold at $1225 (+1.60 %), Silver at $17.46 (+2.30 %), Crude Oil at $87.70 (+0.45 %)
  • Rates: US 10 year yield at 2.321, German 10 year yield at 0.913, UK 10 year yield at 2.271 

News & Data: 

  • Australia Employment Change -29.7k, Expected: +20.0k, Previous: +32.1k
  • Australia Participation Rate 64.5 %, Expected: 64.8 %, Previous: 64.7 %
  • Australia Unemployment Rate 6.1 %, Expected: 6.1 %, Previous: 6.0 %
  • Japan Core Machinery Orders MoM -3.3, Expected: -5.1 %, Previous: +1.1 %
  • Japan Core Machinery Orders YoY +4.7 %, Expected: +0.9 %, Previous: +3.5 %
  • Bank of Japan Governor Kuroda: inflation target will be achieved as expected, ending deflation requirement for higher potential growth
  • Kuroda: BOJ to continue easing until price stability target reached, Japan potential growth rate estimated at about 0.5%
  • Kuroda: sees fiscal stimulus to cushion 2015 sales tax rise, corp. tax cut may help Japan’s economy
  • Kuroda: JGB market is huge, BOJ holdings still just 20%. Bank of England holds 40% of government debt 

FX Overview: 

The main theme in the markets are the more dovish than expected FOMC minutes. The release showed that the Fed remains quite concerned about the global growth outlook and the possibility of a stronger US dollar creating headwinds for the US economic recovery. The rally in US equities that followed after the minutes failed to inspire the Asian markets. While the Hang Seng and ASX gained on the day, the Nikkei and Shanghai Comp both declined around 0.50 %. Meanwhile, precious metals have bounced amid broad USD weakness in the past 12 hours. Crude Oil futures hit a fresh low of 86.83 yesterday, but have recovered somewhat overnight, reaching a high of 0.8790.

Price action in AUD/USD was choppy. The pair hit a low of 0.8796 after employment data missed expectations, but demand from fast money and other leveraged names led to a quick rebound. This clearly reflected that the focus lies on sentiment rather than data and that USD position unwinding could stay the main theme in the short-term. AUD/USD reached a high of 0.8885 and offers are reported in front of 0.89. Above there, not much resistance until 0.8980 and the big 0.90 resistance level. To the downside, support noted at 0.8820 and 0.8770.

USD/CAD broke beneath the 1.10 level, but flows were rather light in Asia. Not much to report here, but the charts suggest 1.1070 and 1.10 are the key support levels, while pivotal resistance lies at 1.12. NZD/USD saw good demand from leveraged funds and dealers note that a bunch of stops got triggered through 0.7920/30. Key resistance at 0.80 and a daily close above that level would likely trigger further position covering as short positioning remains crowded.

Now that the USD has lost some of its shine, GBP doesn’t look that bad, does it? Fundamentals remain solid, the BoE is the first major CB expected to hike rates next year and positioning is neutral after the Scottish referendum washout. A test of the 1.64 resistance level in GBP/USD seems quite possible.

Upcoming Events: 

  • 06:00 GMT – German Trade Balance (18.5bln)
  • 06:00 GMT – German Exports (-4.0 % MoM)
  • 06:00 GMT – German Imports (1.0 % MoM)
  • 08:00 GMT – ECB Monthly Report
  • 11:00 GMT – Bank of England Interest Rate Decision
  • 12:30 GMT – US Initial Jobless Claims (295k)
  • 13:45 GMT – FOMC Member Bullard speaks
  • 15:00 GMT – ECB President Draghi speaks