Market Brief
The risk appetite remained limited in Asia as doctor back from South Africa tests positive for Ebola in NYC hospital. The US equity futures traded lower overnight; Dow Jones futures weakened 0.14%, S&P and Nasdaq futures are down 0.32% and 0.37% at the time of writing.
US 10-year yields advanced to 2.30% in New York yesterday, pushing USD/JPY up to 108.35. USD/JPY and JPY crosses were mixed in Tokyo as Ebola story hit wires. We are close to MACD (12, 26) pivot. A week close above 109.00 should signal a short-term bullish reversal. Markets are concerned that low energy prices may further derive the CPI from BoJ’s 2.0% target. Option bids trail above 107.75/108.00, offers dominate below.
New Zealand’s trade deficit overbeat market expectations in September, widened twice more than market estimates. NZ printed 1,350 million NZD deficit in September (vs. -625mn exp. & -489mn last (revised)), exports were little changed 3.61bn (vs. 3.51bn last) but the imports surged to 4.96bn (from 4.00bn last) due to purchase of an aircraft plus parts. The significant September deficit pulled the 12-month trade surplus down from 1,778mn (revised) to 648mn (vs. 1,530mn exp.). NZD/USD spiked down to 0.7791, the bullish momentum fades suggesting a re-test of 0.7709 (Sep 29th low). The RBNZ rate decision is due next week. Given the softer CPI reading and moderate recovery, the RBNZ’s official cash rate is expected to remain unchanged at 3.50%.
In China, soft house price data kept USD/CNY ranged in Hong Kong. New home prices fell in 69 cities over 70 by 1.3% in year to September (vs +0.3% in Aug). The USD/CNY bias should remain on the downside for a week close below 6.13 (MACD pivot).
AUD/USD remains flat (0.8719/0.8774) with trend and momentum indicators marginally bullish. Solid option barriers are placed at 0.8780/0.8800 for today expiry. The key support stands at 0.8643 (Oct 3rd low). AUD/NZD steps in the bullish consolidation zone (MACD turns positive). Key resistance is seen at 1.1298 (Sep high). Option bids are placed at 1.1150, more support is seen at 1.1116/34 (50 & 21-dma) mostly due to heavier offers in NZD-complex.
The GBP-bulls remain timid after the BoE minutes highlighted concerns on the global economic outlook and on the difficult recovery in the Euro-area, which may lead to a delay in first BoE rate hike. Today, traders are focused on 3Q advance GDP release, the consensus is softer 3Q GDP growth of 0.7% q/q (vs. 0.9% in 2Q) and 3.0% y/y (vs. 3.2% printed in Q2). GBP/USD trades ranged within 1.5875/1.6186 (Oct 15th low / Fib 23.6% on Jul-Oct sell-off), corrective bids give some support below 1.60s. Breakout on either side is required to assess fresh direction. The overall bias remains on the downside, the 3-month cross currency basis suggest preference for USD vs. GBP.
USD/BRL advances to fresh 6-year high of 2.5179 as volatilities escalate walking into October 26th runoff. The event risk is high due to hyper-sensitivity to election polls and political headlines.
Today, traders watch Spanish September PPI m/m & y/y, Italian August Retail Sales m/m & y/y, UK 3Q (Advance) GDP q/q & y/y, UK August Index of Services m/m & 3m/3m, Euro-area 2Q Government Deficit, Italian September Hourly Wages m/m & y/y, US September New Home Sales m/m, French September Jobseekers Net Change and Total Jobseekers.
