Market Brief
In spite of surprisingly good numbers from Japan, USD/JPY continues to trade in a low volatility environment. Machine orders climbed 7.5%m/m in September, the first positive reading since May this year, beating market expectations of 3.1% and previous month reading of -5.7%. Yen traders’ responses were muted with most yen crosses stuck in their daily range. USD/JPY is stabilising around 123 but a slightly negative trend is starting to emerge as the effect of last Friday’s NFPs fades away. Next week’s US CPI report could be a game changer as strong numbers would firmly anchored expectations for a December lift-off.
The biggest surprise of the Asian session came from Australia where the last job report came in well above consensus. The unemployment rate dropped to 5.9% in October, down from consensus and September’s reading of 6.2%. Meanwhile, the participation rate edged up to 65% from 64.9% and employment jumped by 58.6k jobs versus 15k expect and previous revised contraction of 0.8k. We have the feeling that the wind is changing in Australia, after a phase of stabilisation the job market is finally getting some tailwinds, sounding the death knell for the RBA’s easing bias. AUD/USD jumped to 0.7150, breaking its 50dma in a blink of an eye. For now, the Aussie is stabilising above the latter standing at $0.7133.
In New Zealand, food prices kept the pressure high on inflation levels as they contracted 1.2%m/m in October compared to a decline of 0.5% in the previous month. Separately, the manufacturing sector expanded in October but is losing momentum. The index fell to 53.3 from 55 in September as the economy continues to adjust to a new environment of persistently low commodity prices and weaker global demand. Overall, the data were mixed and didn’t allow NZD/USD to pick up a clear direction. The Kiwi is trading closely to the key level standing at 0.6567 (Fib. 50% on September-October 2015). On the downside, the level at 0.6489 (Fib. 61.8%) will continue to support the pair in the absence of significant news.
On the equity front, Asian regional equity markets are treading water as traders await fresh information. The Nikkei 225 edged up 0.03%, while the broader TOPIX index fell 0.11%. In mainland China, the Shanghai Composite dropped 0.48% and the Shenzhen soared 0.28%. In Hong Kong, the Hang Seng caught up with its Asian counterpart after yesterday's negative performance. The index was up 2.51%. Further south, the S&P/ASX 200 edged up 0.06%, while the S&P/NZX was up 0.17%. In Europe, most futures are pointing to a lower open with the FTSE 100 up 0.07%, the DAX is down 0.16%, the SMI up 0.09%, the CAC 40 down 0.17%, while the broader Euro Stoxx 600 falls 0.26%.
Today traders will be watching CPI reports from Germany, France and Sweden; industrial production from the euro zone; retail sales from Brazil; industrial production and CPI from India. Speakers from central banks around the globe will also retain traders’ attention: in the US Bullard, Lacker, Evans, Dudley and Yellen will speak later this afternoon, while in the euro zone Weidman and Mersch will also address a speech. Finally, BoE chief economist Andy Haldane will speak in London.
Currency Tech
EURUSD
R 2: 1.1387
R 1: 1.1095
CURRENT: 1.0743
S 1: 1.0458
S 2: 1.0000
GBPUSD
R 2: 1.5659
R 1: 1.5529
CURRENT: 1.5178
S 1: 1.5027
S 2: 1.4566
USDJPY
R 2: 135.15
R 1: 125.86
CURRENT: 122.94
S 1: 120.07
S 2: 118.07
USDCHF
R 2: 1.0240
R 1: 1.0129
CURRENT: 1.0056
S 1: 0.9739
S 2: 0.9476