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Currency Tech |
AUDUSD
R 2: 0.8860
R 1: 0.8800
CURRENT: 0.8680
S 1: 0.8660
S 2: 0.8595
USDCAD
R 2: 1.0770
R 1: 1.0720
CURRENT: 1.0690
S 1: 1.0610
S 2: 1.0525
EURJPY
R 2: 135.00
R 1: 134.40
CURRENT: 133.80
S 1: 131.05
S 2: 129.35
USDMXN
R 2: 13.570
R 1: 13.545
CURRENT: 13.283
S 1: 13.165
S 2: 13.110
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Market Brief |
Time For The Tide To Turn?
There were early signs yesterday that we may see a lull in the tide of USD weakness; equity markets across Europe still found support from the recent improvements in US data, but the USD did not suffer the accompanying universal sell-off that has characterized the rest of the week. The DXY managed to end the day at virtually the same levels as yesterday’s close at 76.20; finishing higher vs the GBP and CHF, but moderately lower vs EUR. Looking to technical indicators, the 14-day relative strength index (RSI) for EURUSD is hovers around 73 - where 70 indicates a rally is approaching an extreme and a reversal may be imminent. Gold prices, which have dominated the headlines for the past few sessions also pared back some of the week’s gains; from the dizzy peak above $1024 it traded down to $1013 late in NY (currently $1012). Silver also retraced from its high at $17.65 to settle around the $17.25 level ($17.17).
The major event of the previous day was the SNB rate meeting; unsurprisingly the target rate was kept at 0.25%, but policy-makers also renewed their commitment to maintaining a weak currency. It seemed this statement was widely anticipated before the announcement, as EURCHF spiked briefly above1.5230 but failed to gain sustained momentum, and the price soon collapsed as speculators quickly exitted the trade. The SNB also cautiously revised up their growth forecasts and inflation projections, causing to EURCHF end down on the day at 1.5160.
Elsewhere, GBP seemed to shrug off disappointing Retail Sales figures for Aug (flat on the month vs +0.1% expected) and downward revisions to last month’s figures (to 0.2% from 0.4%). However GBP fell heavily (currently 1.6380) after an article from The Telegraph reported that the FSA has rejected a move from the troubled Lloyds Banking Group to withdraw from the government’s asset protection plan – reigniting fears that the financial crisis is still a concern.
Across the Atlantic, US claims data were mixed, but the Philadelphia Fed numbers for Sep came out at 14.1, beating analysts’ forecast for a reading of 8.0. FX markets again witnessed dollar selling after the figures were released, but optimism was, however, short-lived as FedEx and Oracle reported sales that missed analyst forecasts, dragging US stocks lower and reining in investor exuberance. Out of Canada, CPI was uninspiring (flat on the month vs 0.1% exp.), but Leading Indicators for Aug smashed estimates (1.1% M/M vs 0.5% expected). USDCAD traded sideways in a 60bps range but ended the day flat (1.0660).
Overnight, BoJ deputy governor Yamaguchi speaking in Tokyo made comments suggesting the central bank may be considering withdrawing some of the extraordinary measures that have been in place to stimulate markets: "We need to pay heed to the risk that keeping these steps in place for long could hamper an autonomous recovery in market functions and distort asset distribution". Asian equities were heavy, also weighed by news in Japan that one of the largest consumer lenders, Ailful Corp, was seeking to suspend debt payments as it faced difficulty rasing funds.
And after a week crammed with major data, there’s a bit of respite today; very few market-moving items on the agenda, German PPI and Eurozone Current Account for Aug will be followed by UK PSNB/PSNCR and M4 money supply. More significant is likely to be the Bank of England’s ‘Trends in Lending Report’ for Sep which will shed a bit more light on how their injections of liquidity are - or aren’t - feeding through to the rest of the economy.
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