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USD corrects lower in Asia, BOE’s ‘Super Thursday’ – In focus

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 5, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - A minor corrective-rally was seen across the Asia-pac currencies in the Asian trades, as markets continue to digest the hawkish comments from the Fed Chair Yellen delivered on Wednesday. Asian equities extended the previous rally, with the Chinese stocks sharply higher on the back of improving risk-appetite.

    Key headlines in Asia

    Stevens sets a bearish tone in AUD/USD

    BOJ Minutes: Members agree inflation trend to keep improving

    Fed not that far from 2% target, subject to Oil, USD - Fed's Fischer

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

    Broad based US dollar retreat was the main reason behind the minor recovery seen in the Asian currencies. While the USD/JPY pair eased-off two-month highs reached at 121.73 levels on Wednesday, and now remains offered around 121.45 levels. The bulls take breather after the Yellen-inspired sharp rally towards 100-DMA. The greenback rose to the highest level since August against most its major competitors after the Fed Chair reiterated yesterday that Fed remains on track to raise rates next month, although the decision is not made so far.

    While the Antipodeans were struggling to stay in the positive territory with the Aussie still weighed by dovish comments from RBA Governor Stevens comments. RBA Stevens noted that the central bank would prefer an easing approach than a tightening one amid the ongoing growth transition. AUD/USD trades modestly flat, with the upside capped by 50-DMA near 0.7150 levels. Also, its OZ neighbor is seen fighting for 0.66 handle with every attempt to the upside sold-off into the recent weak NZ fundamentals, including the latest poor jobs report.

    The Asian stocks were trading with size-able gains as the upbeat sentiment on the Chinese markets boosted Asia. Japan’s benchmark, the Nikkei rallies +1.16% to 19,146 while China’s A50 index jumps over 4% to 10,746. Mainland China’s benchmark, the Shanghai Composite jumps 2.70% to 3,552 while Hong Kong’s Hang Seng shots 2.29% higher to 23,085. Australia’s S&P ASX index bucks the trend and drops over 1% to 5,190.

    Heading into Europe & the US

    The BOE’s ‘Super Thursday’ is expected to hog the limelight mid a data-deficient EUR calendar. While the ECB President Mario Draghi is scheduled to speak later in the session.

    Data-wise, Germany will report its September factory orders, with 1.0% increase expected m/m, and 1.8% growth annually, against a 1.8% decline seen in August m/m and a 1.9% advance y/y. Besides, EU autumn economic forecasts will be published.

    BOE’s Super Thursday

    The BOE will announce the policy decision accompanied by its minutes and the quarterly inflation report (QIR), a join release, again today.

    Markets are expecting the central bank to leave its policy steady as seen over the past 6.5 years while the vote count to leave interest rates unchanged is expected to remain unchanged at 8-1. Although a 7-2 surprise cannot be ruled out with Kristin Forbes joining in Ian McCafferty.

    The main focus will remain on the QIR, as markets will closely monitor inflation forecasts that may point towards immediate tightening of policy. While comments on the GBP strength from BOE Governor Carney will be paid close attention, apart from the hints on BOE rate hike timing.

    Moving onto the NA session, the weekly US jobless claims will be published later in the day. While Fed talks from FOMC member Dudley and Fischer will remain in focus.

    EUR/USD Technicals

    Valeria Bednarik, Chief Analyst at FXStreet noted, “According to the 1 hour chart, however, there are no signs that the pair may correct higher, given that the technical indicators continue heading south in extreme levels, whilst the 20 SMA has accelerated its decline above the current level. In the 4 hours chart, the 20 SMA has turned lower well above the current level, whilst the Momentum indicator has lost its bearish strength well below the 100 level, whilst the RSI indicator hovers around 25. The pair has posted its lowest since late May at 1.0818, which means large stops could stand below it and therefore, if those got triggered, fuel the decline.”
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