USD Trading Outlook
The EUR finally started to move overnight after lower than expected CPI and higher than expected unemployment put further easing policies back on the table. The falling EUR/USD had a knock-on effect on other major pairs and AUD/USD fell to test the previous day’s lows below .9450. Australian PPI data will be followed at lunch-time by HSBC Chinese manufacturing PMI so we should have a fairly busy day.
The Federal Reserve made no changes to either policy or statement at their overnight meeting and this caused a slight blip in the USD. The market had anticipated that the statement might be adjusted to be slightly more dovish. The other big event for the AUD was a large option expiry at .9500 during the NY session which guaranteed a 10 pip range either side for much of the night. The NZD has been quite volatile over the last 24 hours, dropping sharply on some Moody ratings headlines and rising after a more hawkish RBNZ. Australian business confidence and the BOJ rate decision are on today’s calendar.
Not unexpectedly, Glenn Stevens did his best to talk down the AUD/USD yesterday and this had quite far-reaching repercussions. The market initially targeted stops in the AUD/USD below .9510 and this also put pressure on other pairs like GBP/USD, which gapped sharply lower when stops were tripped below 1.6100. Everything is somehow related in the FX market. There are no major events on today’s economic calendar but we should get some movement as traders adjust positions ahead of the Federal Reserve meeting.
It’s been another very quiet 24 hours in the FX market and the big storms in Europe undoubtedly kept many participants away from their screens. The RBA Governor will be giving a speech this morning and we should watch for headlines which might affect the AUD (no doubt he will try and talk it down a bit). I can’t help feeling that we are soon due for another big move and I expect the focus to remain on the USD; either big levels hold against the other majors or the greenback will fall another 5% before year’s end.
We’ve had a quiet opening to the trading week apart from a 30 pip spike higher in USD/JPY (caused by technical buying after the failure to close below the well-watched 200-dma). Risk appetite remains remarkably resilient across most financial markets and overall USD bearish sentiment is still intact. New Zealand is enjoying a long weekend thanks to their Labour Day holiday and the economic calendar looks quite bare.
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