Risk-aversion – main theme in Asia, US NFP – Key event

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 4, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - Disappointing ECB stimulus measures sparked renewed risk-aversion wave this Friday, with the Asian trading absorbing the ECB news. The euro held above 1.09 barrier against the US dollar after a 4 big figure rally on Thursday while USD/JPY hovered above 122.50 levels amid negative equities. Risk currencies such as the GBP, Antipodeans etc., suffered on diminishing risk-appetite as focus now shifts towards the US payrolls data due later today.

    Key headlines in Asia

    Australia’s retail sales: a tad better in Oct, matched estimates

    SDR basket entry to help discover Yuan’s value – PBOC official

    OPEC internal report warns oil prices to remain depressed – WSJ

    Dominating themes in Asia - centered on JPY, AUD, NZD

    A quiet Asian session as dust settles over the unimpressive ECB event. Markets now brace up for the highly influential US jobs report, which is expected to set the course of policy normalization in the US later this month. On the FX front, risk-off sentiment remained the underlying factor in Asia amid heavy sell-off in the Asian equities following aggressive easing hopes squashes by the usually hawkish ECB Chief Draghi. On Thursday, the ECB opted not to increase the amount of monthly purchases, but extended the QE program until at least March 2017. While the central bank cut the deposit rate from -0.2% to -0.3%, as widely expected.

    Safe-haven currencies benefited the most as investors flocked to safety assets on renewed risk-aversion. USD/JPY faded a spike to 122.85 and dropped sharply to lows near 122.50 as JPY bulls jumped back on the bids. While EUR/USD bounced-off 1.09 barrier and reverted towards daily highs near 1.0945 region. The Swiss franc traded firmer in Asia, keeping range ahead of 0.9900 levels. Among the risk currencies, the Aussie suffered heavily followed by cable. AUD/USD now loses -0.33% to 0.7320, and ignored upbeat Australia’s retail sales data (0.5% vs. 0.4% prev.). While the Kiwi erased losses and trades muted below 0.6700, finding good support from higher oil prices.

    On the equities space, Asian indices are heavily sold-off into ECB disappointment and in anticipation of the US NFP report. Japan’s benchmark, the Nikkei sinks over 2% to 19,512 while Australia’s S&P ASX index drops -1.54% to 5,147. The mainland China’s benchmark, the Shanghai Composite rises -1.19% to 3,542, while China’s A50 index tanks 2% to 10,556 points. Hong Kong’s Hang Seng loses -1.21% to 22,147.

    Heading into Europe & the US

    A relatively quiet EUR calendar today, with Germany’s factory order to fill in another data-dry session ahead. While markets continue to absorb the latest ECB decision.

    Attention now turns towards the North American session, with the main highlight – the US non-ram payrolls in focus. Markets are expecting the NFP report to print 201k in Nov against a stellar 271k numbers booked previously. Analysts say only a big miss in job creation would cast a December Fed hike in doubt. The bank's next monetary policy decision will come on December 16, with growing expectations among investors the central bank will hike rates for the first time in almost a decade.

    EUR/USD Technicals

    The AceTrader Research Team explained, “Euro's spectacular 3.45% rally from yesterday's fresh 7-1/2 month bottom of 1.0523 to as high as 1.0981 near New York close confirms recent downtrend has indeed formed a low there and 'choppy' trading is seen ahead of release of key U.S. jobs report later today.”

    “As long as 1.0848/53 holds, outlook remains supportive for further gain towards next daily chart objective at 1.1073. A daily close below said sup area would suggest 1st leg of correction is over, then risk of a stronger retracement towards 1.0752 50% r) can't be ruled out before prospect of another rise next week.”
    For more information, read our latest forex news.

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