8 October, 2013
The jitters in the market place raise on the unresolved US budget deadlock. As the budget deadline approaches, World’s leading officials urge Washington to find a resolution as concerns on US default denote a potential decline in governments’ treasury holdings in value, and the consequences of US default may have Lehman-like contagion impact.
It has been a data-full session in the Asian markets. The Japanese trade deficit narrowed from Yen 943.3bn to Yen 885.9bn in August, the current account surplus narrowed. The Eco watchers survey showed improvement in expectations and current conditions in Japan’s economy. In China, the HSBC/Markit services PMI retreated from 52.8 to 52.4 in September. The National Australia Bank posted significant progress in business conditions and confidence. Australia’s foreign reserves retreated from AUD 55.7bn to AUD 53.0bn last month.
The Aussie has been the biggest G10 winner against USD over the past 24 hours. AUDUSD traded above 0.9412 in Sydney with key resistance still seen at 0.9460. The high beta currencies are still on hold at the current risk environment, yet a US budget resolution should shift the market focus to hawkish RBA and RBNZ expectations to clear the resistance in AUD and NZD. It is just a matter of time and the upside pressures are likely to remain.
USDJPY and JPY crosses were better bid in Tokyo. USDJPY crossed the 200-day moving average (96.74) on the downside for the first time since November 2012 and extended the downtrend channel building since September 20th (post-Sep FOMC). Later in the session, demand in Japanese stocks and aggressive profit taking on shorts pushed the pair to 97.19. Next key resistance is seen at the daily cloud base (98.10), while the downside should remain supported at the 200 dma (96.74), with more bids seen at 96.50, then 96.00 levels.
In UK, the RICS survey showed that the UK house prices surged to the highest in more than a decade in September, with expectations for more inflation in all areas. The houses in London and the Southeast are reported to have gained the most. GBPUSD remained well supported above 1.6066 in Asia, while the 21-day moving average is seen as the first key support (1.6022) ahead of industrial production data (Wed) and BoE policy verdict (Thu).
Today, traders watch the Swiss September Unemployment, CPI m/m & y/y and August Retail Sales, German August Trade Balance, Exports, Imports, Current Account Balance and Factory Orders m/m & y/y, French August Trade and Budget Balance & Bank of France’s September Business Confidence Index, Spanish August Industrial Production m/m & y/y, Italian 2Q Deficit-to-GDP ytd, US September NFIB Small Business Optimism, Canadian September Housing starts and August Int’l Merchandise Trade, US August Trade Balance, JOLTs Job Openings and US October IBD/TIPP Economic Optimism.
In the October meeting, the BoJ decided to keep the policy unchanged. The annual rise in monetary base remains at Yen 60
US government has partially shutdown at midnight for the first time since 1996, as House Republicans refused to agree on the budget unless it involved a delay in Obamacare...
The week starts with good sentiment as China prints better than expected manufacturing PMI in September (51.2, versus 60.9 expected & 50.1 prev). Shanghai
The FX markets are subject to high volatility, mainly triggered by dovish comments on Fed QE and the ongoing liquidity concerns in China. Though the PBOC sees the liquidity risk controllable, the abstention to add cash in the system generated significant swings in the equity and currency markets so far...
The currency markets are mostly dominated by profit taking and speculative positioning as the investors seek direction these days. The Wall Street rally gave a short-lived boost to risk-positive currencies in New York, yet the limited enthusiasm in Asia lead to some consolidation during the overnight session...