- AUDUSD finds resistance at 0.8766
- Keep your eyes on Hong Kong developments
- Eurozone CPI estimate worth a watch ahead of ECB meet
- UK Sep. GfK Consumer Confidence out at -1 vs. -0 expected and +1 in Aug.
- Japan Aug. Jobless Rate fell to 3.5% vs. 3.8% expected and 3.8% in Jul.
- Japan Aug. Retail Trade out at +1.9% YoY and +1.2% YoY vs. +0.5%/+0.1% expected, respectively and vs. +0.6% YoY in Jul.
- Japan Aug. Preliminary Industrial Production fell -1.5% MoM and -2.9% YoY vs. +0.2%/-1.1% expected, respectively and vs. -0.7% YoY in Jul.
- New Zealand Sep. ANZ Activity Outlook/Business Confidence out at 37.0/13.4 vs. 36.6/24.4 in Aug., respectively
- China Sep. Final HSBC China Manufacturing PMI out at 50.2 vs. 50.5 original estimate and vs. 50.2 in Aug.
- Japan Sep. Small Business Confidence out at 47.6 vs. 47.7 in Aug.
- Germany Sep. Unemployment Change/Rate (0755)
- Norway Aug. Retail Sales (0800)
- UK Final Q2 GDP estimate (0830)
- Eurozone Sep. CPI Estimate/CPI Core (0900)
- Canada Jul. GDP (1230)
- US Sep. Milwaukee ISM (1300)
- US Jul. S&P/CaseShiller Home Price Index (1300)
- US Sep. Chicago PMI (1345)
- UK BoE’s Miles to Speak (1730)
- Australia Sep. AiG Performance of Manufacturing Index (2330)
- Japan Q3 Tankan Large Manufacturing and other confidence surveys (2350)
- Australia Sep. RPData/Rismark House Price Index (0000)
- China Sep. Manufacturing PMI (0100)
- Australia Aug. Retail Sales (0130)
- Japan Sep. Final Markit/JMMA Manufacturing PMI (0135)
- – Edited by Clare MacCarthy
- John J Hardy is head of FX strategy at Saxo Bank
We’ve seen a bit of consolidation in the USD rally overnight, though mostly only in the currencies that had been weakest against the USD of late – like AUD and NZD, where the bounce was rather robust, if not relative to the magnitude of the recent sell-off. AUDUSD has found resistance in the 0.8766, a 38.2% Fibo retracement of the last sell-off wave. GBPUSD is also trying to get peppy a bit early this morning, but all of these USD dips of late have been buys and I wonder why today should be any exception.
Chart: AUDUSD
AUDUSD found resistance in the 0.8766 area, the 38.2% of the last sell-off wave (the last wave that contained no real retracement, at least, it’s a bit tough to choose waves these days). The overall organisation of the descending channel is astounding as have yet to see a significant rally in nearly a month. Note that the highs overnight also coincided with the local channel downtrend line. The major cycle low lies down towards 0.8660, which we nearly reached yesterday. 
Source: Bloomberg, Saxo Bank
The Fed’s uber-dove Evans was out suggesting again that a stronger USD is a factor in policy considerations, including its effect on net exports, GDP growth and inflationary developments.
The latest geopolitical focus is on Hong Kong, to which all of our eyes should be turned for the implications. Hong Kong is a major financial centre and there are potential long term ramifications for the region and for trade/foreign policy relationships that will depend on how the situation develops.
Japan’s weak industrial production number is a disappointment for the Abe government as Japan’s tremendous currency devaluation has not fed a stronger recovery in export demand. This overshadowed stronger retail sale. The Tankan survey numbers are up tonight.
Looking ahead
Watch out for the Norway retail sales data this morning as EURNOK has gone quiet since the big Norges Bank inspired drop from two weeks ago. Then we have the very important Eurozone CPI estimate – still likely a temporary distraction ahead of the European Central Bank main event on Thursday, though a significant surprise could push the action either way as this market contains a good deal of energy. Later, USDCAD will have to decide whether it wants to continue rallying after the Canadian GDP data for June .
Technical notes/Trading stance
EUR EURUSD: not impressed with yesterday’s attempt at a rally – pressure remains on the downside as long as 1.2700/25 area remains intact. A break of the latter could set in motion a 1.2790/1.2800 test, but I prefer to focus lower toward 1.2600 and even 1.2500 and then see what happens at the Thursday ECB.
GBP GBPUSD: GBP trying to rally against EUR again, leaving GBPUSD rangy – but chance of sub-1.6200 test nonetheless. A little reminder of the hopeless current account situation for the UK with today’s UK current account data for Q2 – nobody paying attention to the near 5% current account gap – it will matter some day, if not today.
JPY I remain curious about the potential for a JPY rally on risk aversion – it does seem the negative correlation with risk is not as strong as it once was, but there is still a pull on the JPY when stocks are acting up. Watching the 138.00/137.50 zone in EURJPY with interest for whether we get a reversal lower there. USDJPY has lots of room to consolidate lower if the USD rally begins fading – a break of 109.00 or so could set in motion a consolidation.
AUD AUDUSD – a perfect test of the 38.2% retracement area overnight at 0.8766 – now local resistance. Daily pivot is at 0.8720.
NOK Watch out for the Retail Sales this morning – downside momentum in EURNOK left the scene recently and we backed up to 8.20. Favoring a test of the local 8.14 area if data is strong today. Economic Data Highlights
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