Yen strongest amid Asia risk-off, UK Prelim GDP – In spotlight

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Oct 27, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - Today’s Asian session witnessed renewed bouts of risk-aversion across the financial markets, with the Japanese currency benefiting the most amongst safe-havens. While the riskier currencies such as the Aussie and the NZD were sold-off on the back of falling Asian equities.

    Key headlines in Asia

    Nippon's buy of NAB's insurance business to boost AUD?

    Bouts of risk aversion hit Asian stocks

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

    Risk-off sentiment was in full swing across Asia as markets turned cautious ahead of the upcoming central banks’ events with the Fed 2-day policy meeting kicking-off today. The safe-haven assets except gold enjoyed solids gains, with the yen emerging the winner. USD/JPY drops -0.44% to 120.50 levels while the EURUSD pair gains 0.10% to 1.1066. The Swiss franc remains well bid versus the US dollar, dragging USD/CHF just ahead of 0.98 handle, down -0.25% so far. While gold remained pressured around $ 1164 as uncertainty over the Fed’s outlook on the interest rates continue to weigh.

    The riskier/higher yielding currencies such as the Antipodean and the British pound were on the losing end as a result of the widespread risk-aversion. The AUD/USD pair dropped -0.20% to trade around 0.7230, reversing yesterday’s gains as falling oil and gold prices add to the persisting bearish pressures on the Aussie. While the news surrounding Nippon-NAB deal failed to boost the AUD bulls. The Kiwi also kept losses and halted its recovery from NZ trade data-led drop near hourly 200-SMA at 0.7289, now hovering above hourly 100-SMA at 0.7267. NZD/USD plunged almost 50 pips in a knee-jerk reaction to the poor NZ trade figures which revealed that the trade deficit unexpectedly expanded last month, despite huge beef missing estimates of an $825 million deficit.

    On the equities space, the Asian stocks took the negative lead from the Wall Street and fell into losses as risk-off trades dominated. The Japanese benchmark, the Nikkei, drops 0.95% to 18,770. Australia’s S&P ASX index trades marginally lower at 5,340. While the Shanghai Composite index sinks nearly 2% to 3,367. Hong Kong’s Hang Seng loses 0.80% to 22,933.

    Heading into Europe & the US

    A fairly data-quiet EUR calendar ahead, with the UK’s prelim GDP report to emerge the main market mover in the European session. While money supply data from the Euro zone will be reported, although having negligible impact.

    The UK is expected to publish its advance GDP estimate for the third quarter. Markets expect 0.5-0.6% growth in Q3 q/q after 0.7% in Q2, while on yearly basis GDP growth is expected to show a 2.4% expansion.

    Besides, ECB board member Benoît Cœuré will speak at Instituto Tecnológico Autónomo de México (ITAM) in Mexico City.

    Looking ahead, we have a data-busy New York session today with plenty of risk events from the US due to be reported. The key of the lot is expected to be the US durable goods and consumer confidence data.

    Analyst Brian Daingerfield at RBS noted, “As usual, headline durable goods orders growth may be at the mercy of one of the most volatile categories – civilian aircraft orders. Our expectation for a drop in civilian aircraft orders may contribute to a second consecutive outright decline in durable goods orders.”

    “The consumer confidence index may rise modestly. In October, there were likely offsetting influences from the strong performance in the equity market and the softer-than-expected September employment report. Looking ahead, the US data calendar is loaded with key events this week, including the October FOMC decision, 3Q GDP growth, and the latest PCE deflator and Employment cost index."

    While the crucial 2-day FOMC meeting begins later today with the much-awaited outcome due to be published tomorrow.

    EUR/USD Technicals

    Mohammed Isah of FXTechstrategy explained, “The pair halted its weakness and turned higher on Monday leaving risk of more recovery on the cards. While the 1.1016/17 level zone continues to provide support, we should see a move higher on correction. On the downside, support lies at the 1.1000 level where a violation will aim at the 1.0950 level. A break of here will turn risk to the 1.0900 level with a move below that level targeting the 1.0850 level. Its daily RSI is bearish and pointing lower supporting this view.”

    “On the upside, resistance is seen at 1.1100 level with a cut through here opening the door for more upside towards the 1.1150 level. Further up, resistance lies at the 1.1120 level where a break will expose the 1.1250 level. All in all, EUR remains biased to the downside in the short term but y faces recovery above its key support zone.”
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