Wednesday, November 25, 2015

German IFO surprised to the upside – Swissquote

FXStreet (Delhi) – Arnaud Masset, Market Analyst at Swissquote Bank, notes that the German IFO business climate index surprisingly jumped to 109 in November, the highest level since July 2014, from 108.2 in the previous month.

Key Quotes

“The German economy seems to have weathered the end of summer slump pretty well and the outlook looks great especially given the fact that the weaker euro will provide an extra boost to the economy.”

“The single currency recovered in the Asian session and rose 0.32% versus the dollar, bringing EUR/USD back above the 1.0650 threshold. However, we still believe that there is further room for euro depreciation.”
For more information, read our latest forex news.

USD/JPY catches fresh bid tone, revisits daily high

FXStreet (Mumbai) - USD/JPY continues to move back and forth within today’s trading range, having found strong support near Nov 16 lows, as persisting risk-conditions dictate the moves in the major.

USD/JPY jumps off 122.26 once again

Currently, the USD/JPY pair trades flat at 122.50, retesting daily highs posted at 122.54. The major recovered losses and now extends recovery from weekly lows, as the USD bulls halted its correction and jumped back into the bids across the board. The USD index bounced-off 99.43 lows and climbed to 99.72, trading modestly flat.

Moreover, a major shift in risk conditions after the European stocks opened on a firmer note and subsequently extended higher, also diminished the bids for the safe-haven JPY. While analysts believe the recent issues between Turkey and Russia are unlikely to escalate into a "hot" conflict and hence, risk-appetite returns in markets.

In the day ahead, the major is likely to take fresh cues from a batch of US economic releases for fresh direction on the USD.

USD/JPY Technical levels to watch

The prices trade near session lows and finds immediate support at 122.20 (Nov 16 Low) below which 121.70 (200-DMA) would be tested. To the topside, the immediate resistance is located at 122.59 (daily pivot). A break above the last, the major could test 122.70 (5 & 20-DMA).
For more information, read our latest forex news.

EUR/USD: Offered at hourly 200-MA, drops to hourly 100-MA

FXStreet (Mumbai) - The EUR/USD pair ran into offers around the hourly 200-MA at 1.0675 and fell back to 1.0642 (hourly 100-MA) as the European stocks extended early gains.

Trades at hourly 50-MA

The pair is now trading around the hourly 50-MA located at 1.0642 levels. The European markets opened with a mild positive tone, but went on to extend gains to trade almost 0.50% points higher on the day.

Consequently, the short-covering in the EUR ran out of steam, making way for fresh offers. The traders now await the US personal spending and corporate spending (durable goods orders) data.

EUR/USD Technical Levels

The pair could extend the drop to 1.06 levels in case the immediate support at 1.0642 (hourly 50-MA) is breached. Below 1.06, the doors will be open for a slide to 1.0520-1.05 handle. On the higher side, hourly 100-MA and hourly 200-MA at 1.0661 and 1.0675 would offer resistance, above which major hurdle is seen at 1.07.
For more information, read our latest forex news.

EUR/CHF off highs, back to 1.0830

FXStreet (Edinburgh) - After reaching session highs near 1.0850, EUR/CHF has now returned to the 1.0835/30 band.

EUR/CHF indifferent on Swiss data

The cross has found decent support around the 1.0800 area on Tuesday, managing to gather some traction and recover ground lost after recent highs north of the 1.0900 handle recorded last week.

On the data front, Switzerland’s Consumption Indicator tracked by UBS came in at 1.60 for the month of October, surpassing September’s 1.56.

EUR/CHF levels to consider

At the moment the cross is up 0.14% at 1.0830 and a surpass of 1.0930 (high Oct.30) would aim for 1.0986 (high Oct.2) and then 1.1049 (high Sep.11). On the other hand, the next support lines up at 1.0795 (100-day sma) followed by 1.0703 (low Aug.20) and finally 1.0501 (23.6% Fibo of 0.8695-1.1049).
For more information, read our latest forex news.

WTI back in the red near $ 42.50, EIA report eyed

FXStreet (Mumbai) - The US oil reversed a two-day rally and slipped back in the negative territory as the Mid-East conflict worries were set aside by resurfacing supply glut woes as focus shifts towards the weekly EIA report.

WTI retreats from 2-week highs

Currently, WTI trades 0.90% lower at 42.50, failing to resist 43 barrier. Oil prices snapped previous rally and turned lower on Wednesday as rising crude supplies as reflected by the latest API stockpiles report continue to weigh on investors’ sentiment.

US crude inventories rose by 2.6 million barrels to 488.3 million in the week to November 20, the API reported on Tuesday, against expectations of a 1.2 million barrel rise.

Moreover, concerns regarding Middle-East conflicts on Russian jet shot down by Turkey, appear to have eased a bit as attention now shifts to the upcoming inventory report from the EIA.

Oil rallied on Tuesday after Turkey shot down a Russian warplane near the Syrian border on air-space violation issue, which heightened geopolitical tensions in the Middle East.

WTI Oil Technical Levels

WTI oil has an immediate resistance which stands at 43.46 (Nov 24 high) above which gains could be extended to 44 (round number). While to the downside, the immediate support is at 41.54 (Nov 12 Low), below which the prices could drop to 40.41 (Nov 23 Low).
For more information, read our latest forex news.

Gold offered at Tuesday’s high

FXStreet (Mumbai) - Gold prices ran into offers at Tuesday’s high of USD 1081/Oz levels and threatens to dip into losses as the European equities turned higher.

Markets showing resilience

The US markets rebounded after the weak start and the European equities appear to follow suit. The pan-European Euro stoxx 50 advanced 0.4%, thereby weighing over the safe haven metal. The turn around in the equities marked resilience to Fed rate hike bets and geopolitical uncertainty.

Consequently, Gold surrendered gains in Europe to trade largely unchanged around USD 1075-1076/Oz levels. the metal traders now await the US data – durable goods, personal spending.

Gold Technical Levels

The pair currently hovers around USD 1076.17 (hourly 50-MA). A failure to sustain above the same would expose 1069.12 (previous day’s low). On the other hand, the prices could once again face resistance at 1081 (Tuesday’s high).
For more information, read our latest forex news.

EUR/USD: Retreats to 10-DMA as European stocks open elevated

FXStreet (Mumbai) - A renewed rally in EUR/USD lost steam just few pips shy of 1.07 barrier after the European markets opened upbeat, although Middle-East geo-political concerns still remain in focus amid a data-quiet EUR calendar.

EUR/USD hovering around daily R1

Currently, the EUR/USD pair trades 0.25% higher at 1.0669, easing-off fresh three-day highs recorded at 1.0689 ahead of Europe open. The main currency pair trims gains and slips back below hourly 200-SMA now placed at 1.0679, as the European stocks shrugged-off weakness seen in Asian indices and trades higher on turnaround in risk-conditions in Europe.

The German benchmark, the DAX gains 0.31% while the UK’s FTSE rises 0.70% and the pan-European benchmark, Euro Stoxx 600 advances 0.20%.

Meanwhile, the US dollar is retracing a part of losses incurred since yesterday against its major competitors amid persisting weakness in the US treasury yields. Looking ahead, attention now shifts towards the US macro releases, including the durable goods and Core PCE index, in absence of economic data during the European session.

EUR/USD Technical Levels

The pair trades firmly above 1.06 handle, with the immediate support seen at 1.0642 (1h 50-SMA). Selling pressure will intensify below the last, dragging the pair towards 1.0600/1.0593 (round number/ Nov 23 Low). While to the upside the next hurdle in sight is located at 1.0689 (daily high) and from there to 1.0700 (round number).
For more information, read our latest forex news.

EUR/USD forecast: looks to US data – Commerzbank and Societe Generale

FXStreet (Edinburgh) - The single currency has returned to the 1.0660 area after another failed attempt to clinch the 1.0700 handle, all ahead key data releases across the pond.

Karen Jones, Head of FICC Technical Analysis at Commerzbank, noted the pair’s “divergence of the daily RSI is more pronounced and the market is starting to erode the accelerated downtrend at 1.0663 today. Above here we have the 20 day ma at 1.0778 and the recent high and Fibo at 1.0830/57 is likely to cap”.

In addition, FX Strategist Kit Juckes at Societe Generale suggested “EUR/USD needs to break back above 107:50 to trigger any alarm for chart-drawers, and more likely is that it meanders in a 1.06-1.0750 range for now as positions are reduced”.
For more information, read our latest forex news.

GBP/USD finds support at key fib, hovers near 1.51

FXStreet (Mumbai) - The GBP/USD surrendered part of its gains in early Europe to trade around 1.5095 levels ahead of the UK autumn statement and spending review.

Supported by Key fib

The pair found support at 1.5087 (61.8% of Apr-Jun rally), although the bounceback has been anything but strong as the cable continues to hover at 1.5090-1.5095. The immediate focus now is on the forward-looking economic comments at the UK autumn statement release.

Later today, the weekly jobless claims, personal spending and income report, and durable goods orders number could influence the Fed rate hike bets and impact overall demand for the US dollars.

GBP/USD Technical Levels

The immediate resistance is seen at 1.5117 (hourly 50-MA)-1.5120 (23.6% of 1.5336-1.5053), above which the spot could re-test 1.5161 (38.2% of 1.5336-1.5053). On the other hand, a failure to sustain above 1.5087 would open doors for a re-test of 1.5053 (previous day’s low).
For more information, read our latest forex news.

FX option expiries for Wednesday's NY cut

FXStreet (Bali) - Find below the FX option expiries for Wednesday's NY cut 1000ET, via DTCC.

- EUR/USD: 1.0500(E1.1bn), 1.0525(E344mn), 1.0550(E1.51bn), 1.0600(E1.85bn), 1.0650(E702mn), 1.0700(E1.62bn), 1.0750-55(E668mn), 1.0800(E2.62bn), 1.0820-30(E1.04bn), 1.0850(E463mn)

- USD/JPY: 121.00-10($2.15bn), 121.75($400mn), 122.00($1.44bn), 123.00($1.72bn), 123.50($1.48bn), 123.75($500mn), 124.00($1.8bn), Y125.00($675mn)

- AUD/USD: 0.7095-0.7100(A$340mn), 0.7300(A$858mn)

- EUR/JPY Y131.65(E320mn)

- GBP/USD: $1.4980(Gbp543mn):

- EUR/GBP: 0.7100(E309mn), 0.7150(E201mn)

- USD/CAD: 1.3185-90($490mn), 1.3275($234mn), 1.3285-90(A$488mn), 1.3305($290mn)
For more information, read our latest forex news.

USD/JPY and treasury yields weaken, risk-off intact?

FXStreet (Mumbai) - The USD/JPY fell in Asia and remains below 122.41 (23.6% of 118.06-123.76), while the treasury yields weakened moderately.

Risk-off ahead?

The move indicates the risk-off mood might prevail in the European session. The major European equity index futures are trading flat to negative, while the Asian markets traded mixed.

However, the traditional safe havens are on the rise in early Europe. Even gold prices inched higher to near USD 1180/Oz levels, while the 10-year treasury yield dripped almost 2 basis points. It remains to be seen if the European equities turn higher or follow the safe havens and suffer losses.

USD/JPY Technical Levels

The pair fell to a fresh session low of 122.26. The immediate resistance is seen at 122.87 (10-DMA) and 123.00, above which it may test offers at 123.26 (Nov 23 high). On the other side, support is seen at 122.22 (Nov 16 low) and 121.76 (100-DMA).
For more information, read our latest forex news.

RBA governor Stevens “happened to agree with” the reasons for holding rate steady

FXStreet (Mumbai) - Reserve Bank governor Glenn Stevens yesterday signalled that interest rates will stay on hold at the central bank’s meeting on 2nd December. He said he agreed with the reasons for leaving the rates steady. While taking a decision on rate cuts, he said he will be ‘guided by what was effective.’ Steven noted the business cycle will continue and also predicted economic downturns from time to time.

RBA can lower rates further if it really helps

Stevens had to respond to the question why the central bank had not slashed rates again even though the economy was not growing as expected and inflation was low. The banks did not slash rates probably because it thought the economy was picking up. It is also possible that the bank refrained from slashing rates further as it thought it would hurt the incomes of retirees who lived off interest.

“How to make growth better?” is what Governor Stevens asks. He admitted on way to stimulate growth is by lowering rates. He said he would be “content” to lower rates further if it really helped. He however questions whether cutting rates is the best solution that the economy can come up with at any particular time. He has warned that cutting rates now would not yeild the kind of benefits that it used to provide to stimulate the economy when rates were cut from very high levels in the 1990s.

He also believes in considering an alternative method to boost growth. “…may be that you can make it better most effectively by articulating a case for stability, playing to the positive things that are happening, not smashing the savers over the head further, if the relative effect of that stimulating is not as great as it used to be”, he said.

Business economists surveyed at the conference expect the central bank to leave its cash rate steady at 2 per cent in 2016 and lift it only when economy picks up in 2017.

Growth will pick up when effect of decline in mining investment ebbs

The central bank lowered its forecast for inflation a little. It was noted that the effects of a decline in the exchange rate are taking a little longer that expected to be impactful. Also, slow wage growth domestic costs to pick up slowly. Steven admitted that it is difficult for a central bank alone to create inflation, when other powerful forces are at work.

Governor Stevens is of the opinion that as the impact of the decline in mining investment begins to wear out, and the effects of assumed low levels of interest rates and the exchange rate continue to increase, growth will likely pick up.

Business surveys have indicated that firms believe conditions to be above their long-term average in some key sectors. Firms have also stepped up their hiring. Job vacancies have been increasing; so has labour force participation. Unemployment rate has held stable. Steven feels that these factors have supported the income growth while the effects of the terms of trade decline wore itself out.
For more information, read our latest forex news.

EUR/USD in session highs, 1.07 closer

FXStreet (Edinburgh) - The buying interest is now picking up pace around the single currency, helping EUR/USD to clinch fresh highs in the 1.0690 area.

EUR/USD stronger ahead of US data

The pair is up more than a big-figure since recent lows in the 1.0590 area, bolstered by a softer tone in the greenback after being rejected once again from key resistance levels.

Absent data releases in Euroland today, market participants will look to the heavy US calendar for cues on the price action, as Initial Claims, PCE, Durable Goods Orders will take centre stage later in the NA session.

EUR/USD levels to watch

As of writing the pair is up 0.35% at 1.0683 with the next hurdle at 1.0805 (23.6% Fibo of 1.1496-1.0591) ahead of 1.0829 (high Nov.12) and finally 1.1058 (200-day sma). On the other hand, a breach of 1.0591 (low Nov.23) would target 1.0519 (low Apr.13) en route to 1.0456 (2015 low Mar.16).
For more information, read our latest forex news.

ECB to temporarily halt QE at the year end

FXStreet (Mumbai) - The European Central Bank (ECB) was on the wires providing an advance notice to the markets that it intends to halt its QE program in the last week of December.

The banks said it will temporarily pause Asset Purchase Programme purchases between 22 Dec - 1 Jan in anticipation of lower market liquidity during this period and may front load purchases and may front load purchases in the prior weeks.

The APP program will resume as ususal from 4th Jan. The ECB says the move is intended to reduce possible market distortions.
For more information, read our latest forex news.

NZGB 2020 tender preview - Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that Thursday’s tender of $200m 2020 NZGBs should be supported by NZ swap spreads at multi-year lows.

Key Quotes

Valuations & relative value: Valuations are supportive. The 2027 swap spread at 7bp is lower than the adjacent 2019 and 2021. Our Nelson-Siegel curve fitting model estimates it is fair to the fitted curve.

The 2020 swap spread is the cheapest it has been for three years. Swap spreads have fallen sharply in most developed markets, and NZ’s spreads have followed suit. However US and AU swap spreads bounced off record or multi-year lows this week and NZ could do similar during the week ahead. Notably, the 2033 swap spread became negative (-4bp) for the first time in its short history, and this may entice investors given the NZ repo market does not suffer from the distortion in the US. If investors deem the 2033 swap spread too cheap, some of that sentiment may rub off on the 2020.

Tender performance: Recent tender performance of NZGB nominals has been sub-average. The last few 2020 tenders have resulted in a slight increase in tail size, to a still respectable 1.3bp in October.

Demand: Local financial conditions remain bond-supportive: the RBNZ is expected by economists and market pricing to cut the OCR to 2.5% in December. Moreover, markets are now assigning a 20% of further easing to 2.0% next year. Any Fed tightening in December could hinder the performance of NZGBs, although shorter durations may be less affected.

Details: Tender bids close at 2:00pm NZT, with results published from 2:05pm. Settlement is on 1 December.”
For more information, read our latest forex news.

USD/CHF pullback is seen as corrective – Commerzbank

FXStreet (Edinburgh) - According to Karen Jones, Head of FICC Technical Analysis at Commerzbank, the current pullback in the pair should be corrective.

Key Quotes

USD/CHF is losing momentum ahead of the 1.0295 2015 high”.

“The recent high has yet to be confirmed by the daily RSI and the accelerated uptrend eroded, we would allow for a near term corrective set back”.

“The Elliott wave count is suggesting that we will see a correction back into the 1.0050/.9940 band ahead of recovery. Dips lower will find initial support at the 1.0122 November 19 low”.
For more information, read our latest forex news.

GBP/JPY is silent around 50% fib level

FXStreet (Mumbai) - The GBP/JPY pair is trading comatose just above 184.68 (50% of 180.66-188.70) ahead of the UK autumn statement and spending review.

Eyes UK event

The minor correction in the USD led to an equal move higher in the GBP and JPY against the greenback, hiwhc left the GBP/JPY cross largely unchanged around 184.75.

The markets now await UK autumn statement, which carries forward looking economic statements. The markets expect Osborne to sound cautious on the UK economy and is expected to announce spending cuts, and boost housing programe.

GBP/JPY Technical Levels

The immediate resistance is seen at 185.00 and 185.47 (hourly 50-MA), above which the gains could be extended to 185.63 (38.2% of 180.66-188.70). On the other side, a failure to sustain above 184.68 (50% of 180.66-188.70) would open doors for a re-test of 184.32 and 183.73 (61.8% of 180.66-188.70).
For more information, read our latest forex news.

EUR/JPY choppy around 130.40

FXStreet (Edinburgh) - The single currency is posting meager gains vs. the Japanese yen on Wednesday, with EUR/JPY hovering over the 130.40 area so far.

EUR/JPY indifferent to BoJ

The cross keeps the trade near multi-month lows, unable to gather further traction as significant catalysts remain absent so far.

Nothing new from the BoJ in its minutes today, with the central bank blaming the decline in energy prices for the current lack of reaction of domestic inflation. The BoJ has also reiterated that it is not considering further stimulus for the time being, broadly in line with market expectations.

EUR/JPY significant levels

The cross is up 0.08% at 130.49 with the next hurdle at 133.23 (high Nov.6) followed by 134.25 (200-day sma) and finally 134.93 (100-day sma). On the other hand, a break below 130.29 (low Nov.23) would expose 130.12 (low Jan.26) and finally 130.00 (psychological level).
For more information, read our latest forex news.

US: Jam packed trading session – Danske Bank

FXStreet (Delhi) – Research Team at Danske Bank, we have several important releases in the US today ahead of Thanksgiving on Thursday and Black Friday.

Key Quotes

“Most important is the release of PCE inflation in November. Consensus anticipates that PCE core (the inflation measure FOMC targets) increased 0.1% m/m in October (1.3% y/y). The subdued core inflation is the number one worry for the FOMC as growth remains solid and the labour market continues to tighten.”

“The slowdown in China and the strong USD weigh on the US manufacturing sector. This is likely to be reflected in the durable goods orders which, however, is quite volatile from month to month.”

“Also due today in the US is the October report on personal income and spending, preliminary data for Markit PMI services in November, initial jobless claims and final University of Michigan consumer sentiment for November. New home sales in October could also attract attention as the September figure was very weak.”
For more information, read our latest forex news.

US: Hectic day ahead of Thanksgiving - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, suggests that it will be a very busy day for data as the release dates on several reports have been moved forward in observance of US Thanksgiving.

Key Quotes

“The October data for personal income and outlays and durable goods orders will be the highlights. We are looking for personal spending to accelerate from +0.1% to +0.3% m/m (in line with consensus), supported by a 0.5% monthly gain in personal income (consensus: +0.4%).”

“Core PCE inflation (the Fed’s preferred measure of price pressures) is expected to print at +0.1% m/m (in line with consensus), with the year-ago pace of inflation edging higher from +1.3% to +1.4%. We are looking for a firm rebound in durable goods orders at +2.1% m/m thanks to strength in the aerospace component (consensus: +1.6%), though the ex. transport number should still be modestly positive (TD: +0.8% m/m, consensus: +0.3% m/m) which will bode well for business investment.”

“There will also be a slew of lower-tier releases, including initial jobless claims for the third week of November and the October new home sales data. We are looking for jobless claims to pop higher from 271K to 282K (consensus: 270K) which will see the 4-week moving average rise from 271K to 276K, while we are forecasting a 3.8% rebound in new home sales to 486K (consensus: 500K).”

“Lastly, we will be watching the U. Michigan Consumer Confidence Index (TD: 92.4, consensus: 93.1) following the very soft reading on the Conference Board’s consumer sentiment measure.”
For more information, read our latest forex news.

NZ: Forward indicators warns of economic slowdown in Kiwi economy – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that the NZ economic data continues to point to the NZ economy ticking along at a respectable, albeit slowed, pace through the middle part of this year.

Key Quotes

“But recent forward looking indicators of activity are not looking nearly as encouraging, and leave us feeling a little more confident in our call for a December rate cut, which we previously viewed as a close call. Furthermore, inflation pressure remains notably absent. This supports our view that the RBNZ will eventually lower the OCR below 2.5%.”

“Last week’s data (weaker dairy auction, solid retail spending) has caused us to raise our probability of a December cut from 60% to 70%. Yet no matter what happens in December, the inflation outlook remains weak. We’ve recently lowered our December 2015 quarter forecast to -0.2% which leaves us forecasting just 1% inflation for September next year. Consequently, we remain comfortable forecasting further cuts in the OCR.”

“Our model of short-term NZ economic momentum shows a small rebound from a low level, which is consistent with the slower pace of economic activity we have witnessed lately. Our data pulse model’s reading supports our view that 2yr swap rates and the NZD/USD will fall during the next few months, given the usual lag between the data pulse and markets.”
For more information, read our latest forex news.

Brazil: Selic rates likely to be on hold in today’s meeting - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, expects the Selic rate to be kept on hold at 14.25% in Brazil.

Key Quotes

“The press statement accompanying the October COPOM meeting repeated the formula “that the maintenance of this basic interest rate level, for a sufficiently long period, is necessary for the convergence of the inflation to the target in the relevant horizon for the monetary policy”. Inflation is continuing to creep up, with November IPCA-15 reaching 10.28% Y/Y, but inflation should start falling next year, if only because of base effects. The DI curve is pricing in a lowish chance of a 25bps hike at today’s meeting, but is continuing to price in large rate hikes further out.”

“Our central expectation is that 14.25% will represent the high point in the tightening cycle and that rates will start being cut towards the end of next year. However, in the near-term the risk to rates is to the upside.”
For more information, read our latest forex news.

GBP/USD: Recovery halts above 1.51 ahead of UK autumn statement

FXStreet (Mumbai) - The GBP/USD, at 1.5105, is struggling to extend recovery ahead of the UK autumn statement and spending review due today.

Stalls near key fib level

The momentum stalled in Asia as the pair neared 1.5120 (23.6% of 1.5336-1.5053). Traders would watch out Osborne’s comments over the UK economy. Carney and Co maintained their cautious tone yesterday and markets believe Osborne is likely to follow them today.

Later in the day, the cable could witness action on the batch of US data – durable goods orders, weekly jobless claims, personal spending and income report.

GBP/USD Technical Levels

The immediate resistance is seen at 1.5117 (hourly 50-MA)-1.5120 (23.6% of 1.5336-1.5053), above which the spot could re-test 1.5161 (38.2% of 1.5336-1.5053). On the other hand, a failure to sustain above 1.51 would open doors for a re-test of 1.5053 (previous day’s low).
For more information, read our latest forex news.

RBNZ: December to be a close call – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that markets have slightly increased the chance the RBNZ will ease by 25bp on 10 December, to 56%, but a full cut is not priced until January 2016.

Key Quotes

“We assess the chance of a December at around 70%.”

“What could swing the odds of a cut one way or the other ahead of 10 December? There’s a dairy auction on 1 December (a price bounce, currently predicted by futures, would argue towards not cutting), and US payrolls on 27 November (a strong number would push the USD higher and argue towards not cutting).”
For more information, read our latest forex news.

BoJ Minutes: No monetary policy action required for now - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, notes that the just released BoJ minutes from the Oct 30th meeting indicated that further monetary policy action is not needed for now.

Key Quotes

“The Board believes that low core CPI is temporary and is largely due to the decline in energy prices. That said the Board did acknowledge it is willing to make some adjustments to monetary policy, but the Board gave itself more breathing space to achieve its 2% inflation objective out to the 2nd half of the 2016 fiscal year.”
For more information, read our latest forex news.

USD: Uptrend is here to stay – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, recommends to buy on dips in the USD as the uptrend for the currency remains intact.

Key Quotes

“Absent a significant adverse shock resulting in a materially weaker run of data and/or a deep risk-off episode over the next four weeks lift-off next month is assured. With markets pricing in a 70% probability, the implied odds of an adverse shock that veers the Fed off course are thus an unrealistically high 30% (assuming effective Fed Funds rises 25bp on a hike).”

“Yield support for the USD should thus continue to build into the Fed meeting. A probable “dovish” Fed hike as Chair Yellen emphasises a gentle trajectory suggests the Dec 16 hike could mark a temporary high for the USD, especially given the temptation to lighten positions into year’s end. But until then,.”

“The first week of Dec is an especially key one including two Fed Chair appearances, Nov payrolls, the much anticipated 3 Dec ECB meeting and OPEC’s bi-annual meeting.”
For more information, read our latest forex news.

EUR/GBP in a tight range near 0.7060

FXStreet (Edinburgh) - EUR/GBP is extending its weekly rebound from sub-0.7000 levels, managing to clinch the 0.7060/65 band so far.

EUR/GBP bid on GBP weakness

The European cross has met significant buying interest on Tuesday following dovish comments by BoE officials against the backdrop of the Inflation Report Hearings.

In fact, the pound has been sold off after A.Haldane casted a mantle of doubt over the possibility of inflation figures picking up pace at any time soon, while Governor M.Carney argued that lower interest rates could stay for longer.

Nothing worth mentioning data wise in Euroland, with only Italian Industrial Sales/Orders due. Across the Channel, Mortgage Approvals by BBA are also due.

EUR/GBP important levels

As of writing the cross is down 0.01% at 0.7059 and a break below 0.6985 (low Nov.17) would open the door to 0.6948 (low Aug.5) and then 0.6934 (2015 low Jul.17). On the flip side, the next hurdle lines up at 0.7101 (23.6% Fibo of 0.7496-0.6979) ahead of 0.7196 (100-day sma) and finally 0.7210 (200-day sma).
For more information, read our latest forex news.

AUD: Construction activity posts record fall - TDS

FXStreet (Delhi) – Prashant Newnaha, Rates Strategist at TD Securities, notes that the value of Australian Construction activity in Q3 fell 3.6%, more than the 2% decline the market had pencilled in.

Key Quotes

“This was the largest percentage quarterly drop since 2000 and was largely due to the decline in resource related engineering, -7.3%/qtr with investment in housing (+2%/qtr) and office buildings (-1.9%) failing to plug the gap. What today’s data shows is that the Australian economy is heavily reliant on housing.”

“Looking ahead we expect the large pipeline of work remaining to push construction higher over the next few quarters. As a result, value of construction activity will continue to remain reliant on housing.”

“There were no real monetary policy implications from the RBA Gov’s speech titled ‘The Long Run’ to the Australian Business Economists dinner. He suggested market participants ‘chill out’ over the Christmas period and assess the data then, more or less dismissing the possibility of a Dec cut, but then again the market is virtually prices for that anyway.”
For more information, read our latest forex news.

Shouldn’t rule out any options to adjust policy – BOJ’s Shirai

FXStreet (Mumbai) - Bank of Japan (BOJ) board member Sayuri Shirai was on the wires today, and noted that the central bank 2% price target should be met at the earliest. He further added should the prices fail to rise as expected, then the BOJ may consider rolling out further stimulus.

Key Quotes:

No change to my view Bank of Japan must hit 2 pct
inflation at earliest date possible but must be mindful of how rising prices could hurt households

Some households are enjoying benefits of rising wages and spending more, monetary policy must support such positive momentum

Must consider two-year timeframe for hitting boj's inflation target with some flexibility

Unclear at what pace inflation expectations will heighten ahead

Bank of Japan isn't having any problem buying assets under QQE

If any problems emerge in buying assets in future, Bank of Japan can come up with other ways to sustainably achieve 2 pct inflation

Can determine outlook for inflation expectations once underlying prices start to rise

If broad uptrend in prices fails to materialise, Bank of Japan must consider whether easing is not enough or whether other steps are needed

Changing size of BOJ's purchases of jgbs, risk assets or buying longer-dated Japanese Govt. Bonds most likely first option if Bank of Japan were to adjust policy again

Bank of Japan shouldn't rule out any policy options but basic idea is to maintain framework of QQE even if it were to adjust policy
For more information, read our latest forex news.

NZD/USD remains undervalued – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that according to their short term fair value model for NZD/USD shows it remains undervalued by around 6 cents, as it has been for the past month.

Key Quotes

“Our fair value range is 0.71-0.72, based on the NZ-US interest rate spread, commodity prices and risk sentiment.”

“Significant NZD/USD undervaluation has persisted since mid-2015. One explanation is the US dollar’s overvaluation, markets pricing more Fed tightening into the US dollar than is implied by US interest rates.”

“NZ dairy prices risk bouncing at the next auction on 1 Dec. The front WMP futures contract is predicting a 13% rise at this juncture, and more distant contracts are pointing to a steep price curve. Coming on the back of a large surge in prices from August and then a sharp fall from October, this suggests markets are trying to find an equilibrium ahead of a looming El Nino-induced drought.”
For more information, read our latest forex news.

USD/JPY: Recovery stalls near 122.50

FXStreet (Mumbai) - The risk-off sentiment appears to have eased heading into early Europe, lending support to the recovery in USD/JPY from weekly lows. Although the price struggles to extend beyond 122.50 over the last hours.

USD/JPY bounces-off lows near 122.20

Currently, the USD/JPY pair drops -0.11 to 122.40, attempting a tepid-recovery from fresh weekly lows reached at reached at 122.26 earlier on the day. The Japanese currency trims gains versus its American counterpart, as risk-aversion eases with the Asian markets recovering losses towards the closing hours. Chinese stocks have in fact turned positive while Nikkei closed -0.39%.

Also, the greenback recovered partially against its six major competitors as focus remains on a swarm of US economic data amid a data-dry EUR calendar ahead. The USD index recovers to 99.55 from lows struck at 99.43, losing -0.14% on the day.

Meanwhile, markets now await the European open for further cues on the risk-off/on sentiment, which is likely to impact USD/JPY.

USD/JPY Technical levels to watch

The prices trade near session lows and finds immediate support at 122.20 (Nov 16 Low) below which 121.70 (200-DMA) would be tested. To the topside, the immediate resistance is located at 122.59 (daily pivot). A break above the last, the major could test 122.70 (5 & 20-DMA).
For more information, read our latest forex news.

Global disinflation and structure of EM balance sheets point to value in EM duration - Nomura

FXStreet (Delhi) – Research Team at Nomura, suggests that the last two years have seen significant pressure on EM assets, but EM local rates have generally been resilient.

Key Quotes

• “There have been specific areas of tension in local bonds, with Brazil the best example. But most EM local curves have been resilient, despite pressure on EM FX, credit, and equity markets.

• The resilience of EM local debt was particularly impressive in Q3, when selling pressure of EM assets was otherwise fairly indiscriminate.

• Structural global forces continue to be broadly favorable for high-grade fixed income instruments. For example, the FOMC recently recognized that the equilibrium real interest rate (r*) is lower in this cycle than in past cycles.

• Moreover, China is facing a cyclical downturn, driven by a significant moderation in industrial and property market activity. This is set to be a powerful global disinflationary force over the next few years.

• At the local level, we continue to note that emerging market balance sheets (at the country level) have a very different structure today than they did in the 1980s and 1990s. In particular, the exposure to hard-currency debt looks manageable in most countries. Importantly, this means that currency depreciation does not feed into rising default risk on EM sovereign debt in the way EM markets have typically seen in the past.

• For global investors, the opportunity to take advantage of bond bullish forces (disinflationary and low real yield drivers) in major markets is limited, simply because nominal yields are already at historically low levels (although some would argue that the U.S. may be an exception to this).

• These arguments imply that EM bond markets are an obvious place to look for returns (and hedges) related to a low-growth / low-inflation global equilibrium in coming years.”
For more information, read our latest forex news.

EUR/USD: Rejected near hourly 200-SMA, tests 1.0650

FXStreet (Mumbai) - The EUR/USD pair met fresh supply near 200-SMA at 1.0680 and reverted to familiar ranges around 1.0655 levels, as the US dollar recovered partial losses against its major peers.

EUR/USD remains below 10-DMA at 1.0664

Currently, the EUR/USD pair trades 0.10% higher at 1.0654, testing good support at hourly 20-DMA (1.0652). The main currency pair failed near hourly 200-SMA and dropped sharply to the hourly 20-SMA, where bids seem to re-emerge.

The renewed bout of risk-aversion seen in Asia as traders continue to weigh the persisting geo-political risks, continue to aid the recovery in the EUR/USD pair from multi-month lows. Although the pair lacked follow-through and hovers within previous trading range centered around 1.0650 levels.

In the day, there is nothing relevant in terms of economic news in the EUR calendar and hence, the focus now remains on the US macro releases, with the durable goods and Core PCE index in the spotlight.

EUR/USD Technical Levels

The pair trades firmly above 1.06 handle, with the immediate support seen at 1.0639 (1h 50-SMA). Selling pressure will intensify below the last, dragging the pair towards 1.0600/1.0593 (round number/ Nov 23 Low). While to the upside the next hurdle in sight is located at 1.0681 (1h 200-SMA) and from there to 1.0700 (round number).
For more information, read our latest forex news.

NZD/USD to trade range bound – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, holds a neutral bias for the week ahead, with the pair locked in a 0.6500-0.6600 range.

Key Quotes

“There’s nothing in the NZ event calendar this week to ruffle the NZD, it containing only two minor data releases - migration (Mon) and the trade balance (Thu) which should remain in deficit, thanks to lower commodity prices.

3 months ahead: By year-end, we see the NZ economy slowing, the RBNZ easing in December, and the Fed tightening the same month. We target 0.62. The main risk to this bearish view is the Fed delays its tightening cycle beyond December. A secondary risk is the RBNZ doesn’t cut in December.

1 year ahead: Our 1 year ahead forecast is 0.62, based partly on the OCR being cut to 2.0%.”
For more information, read our latest forex news.

GBP/USD: Bulls face exhaustion near hourly 50-SMA

FXStreet (Mumbai) - The overnight recovery in GBP/USD stalled and ran through fresh offers near the hourly 50-SMA located at 1.5119, with the price now wavering around 1.51 handle.

GBP/USD keeps range around daily pivot at 1.5096

The GBP/USD pair gains 0.12% and trades at 1.5100, re-attempting recovery from hourly 10-SMA at 1.5092 levels. The bulls appear to face exhaustion after recovering more than 50-pips from two-week lows and struggles to extend gains beyond 1.51 handle.

The GBP/USD recovery appears short-lived as the recent dovish and downbeat comments from the UK’s Treasury select committee on the economic and policy outlook will continue to weigh on investors’ minds.

While the greenback may halt its corrective mode ahead of the release of a batch US economic data amid thin markets as the US markets enter a holiday-break on account of Thanksgiving Day.

Later in the day, no macro data is due to be reported from the UK data, although the UK’s autumn forecasts statement to be released later in the European session will keep the GBP traders busy.

GBP/USD Levels to consider

The pair has an immediate resistance at 1.5119 (1h 50-SMA), above which 1.5159 (Nov 24 High) would be tested. On the flip side, support is seen at 1.5051 (Nov 24 Low) below which it could extend losses to 1.5038 (Nov 9 Low).
For more information, read our latest forex news.

Japanese economy: Exiting from negative gear growth – Nomura

FXStreet (Delhi) – Research Team at Nomura, suggests that the even though the Japan’s real GDP growth for 2015 Q3 came in at -0.8% q-q annualized, representing the second consecutive quarter of negative growth, the economic downturn is not as bad as suggested by the reported figures because final demand minus inventories has been picking up.

Key Quotes

“We see little risk of sustained large-scale inventory corrections and also see good prospects for a recovery in industrial production, with which real GDP exhibits a strong degree of correlation. We think the economy could well return to growth in Q4.

Exports likely to increase modestly despite overseas economic slowdown: Exports have remained on an upward trajectory and we have yet to see any strong signals of downside risk. Overall, we think that overseas economies will continue to expand modestly despite the ongoing slowdown in China. We see little risk of the Japanese economy being tripped up by falling external demand.

Improving profitability a structural factor supporting capex: Capex has fallen for two straight quarters. This has prompted widespread disappointment, especially because the BOJ Tankan has revealed bullish capex projections. However, it would be premature to conclude that there has been any major decline in capex enthusiasm in the corporate sector. We think capex will not buckle easily because it is supported by the structural factor of improving profitability.

Consumer spending boosted by improvements in consumer sentiment and income and employment conditions: Consumer spending has been recovering, albeit still slowly. Rising inflation expectations have partially dented consumer sentiment, but this factor may disappear in due course. Consumer spending may also receive a boost from sustained improvement in income and employment conditions owing to tighter supply-demand conditions in the labor market.

We still expect additional monetary easing in April 2016: We think the BOJ will engage in an additional round of monetary easing in April 2016 because (1) it will need to further boost inflation expectations in order to achieve its 2% inflation target and (2) JGB supply constraints mean it will probably announce that it is thinking about tapering JGB purchases around the same time, increasing the need for policies to counteract the impact of potentially unwelcome developments for the markets. We think the BOJ could well end up with some kind of de facto yield curve target.”
For more information, read our latest forex news.

Risk-off extends into Asia, a host of US data eyed

FXStreet (Mumbai) - Risk-off sentiment weighed across the financial markets in Asia amid heightening geopolitical risks surrounding Middle-East and global terrorism threats. Investors therefore gave up riskier assets such as the equities and flocked to traditional safe-havens – gold, the yen, euro and Swiss franc.

Key headlines in Asia

Japan to grow by 0.5%-1.5% in 2016 - Moody's

BOJ minutes: Economy likely to grow at slower pace in FY 2017

AUD/USD: M&A flows possibly supportive today - Westpac

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

The US dollar extended weakness for the second straight session, with no major catalyst behind the downside bias other than a technical correction. However, mixed US macro data released on Monday added to the ongoing USD retreat. Moreover, markets preferred to park their funds into safe-havens and hence gave up the risk-currency, the greenback. The US dollar index drops -0.10% to 99.58.

In response to the rising demand for safe-haven assets, the yen was strongly bid against the US dollar and rose to fresh weekly highs at 122.26, before easing slightly to 122.40 levels, where it now wavers. The EUR/USD pair also benefited from the renewed risk-aversion wave and trades around 1.0655, recording a 0.13% gain so far. While gold was the best performer among the safe-havens, rising 0.26% to $ 1078.

The Antipodeans shrugged off the risk-off markets and climbed higher in Asia, extending its recovery from multi-month lows. The commodity-currencies rejoiced the rebound in the commodity prices, with gold prices reverting to $ 1080 while the US oil gains 0.62% and nears $43. Copper prices recover to $ 2.06 on Comex. The Aussie ignored the downbeat construction data and now trades near monthly highs at 0.7265 levels. While the Kiwi advances 0.29% to 0.6575.

The Asian stocks extended previous losses, with Japan’s benchmark, the Nikkei now losing -0.38% to 19,849. While mainland China’s benchmark, the Shanghai Composite steadies around 3,620 points. Australia’s S&P ASX index drops -0.40% to 5,204. While Hong Kong’s Hang Seng declines -0.41% to 22,494.

Heading into Europe & the US

There is nothing much to report in term of economic data in the upcoming European session, except for the second-tier data in the UK BBA mortgage approvals.

Besides, RBA Assistant Governor Debelle will be on wires, speaking at FX Week Europe's annual conference, in London. While the UK Chancellor George Osborne will present Autumn Forecasts Statement later today in Westminster, with markets expecting amid concerns the Treasury to miss its 2015-16 fiscal targets.

Looking ahead, today’s US calendar is fuller, wrapping up the holiday-shortened week. The US traders will be away on a Thanksgiving Day-break from tomorrow until Monday. The US durable goods data will kick-off a fuller US calendar followed by Core PCE index, personal spending, new home sales and finally revised consumer sentiment will bring an end to the swarm of data releases.

The macro data from the US are expected to have negligible impact on the US dollar as a Dec Fed rate hike is a done deal now. Only on a horribly weak durable goods order print could raise concerns over the Fed rate hike options. However, the NFP report next week is likely to hold greater significance and determine the chances of a Dec rate rise, as the Fed remains more concerned about the US labor market conditions.

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “The technical picture is still neutral-to-bearish according to the 4 hours chart, as the price remains unable to advance beyond a mild bearish 20 SMA, whilst the technical indicators have recovered from near oversold levels, but remain below their mid-lines.”

“In the 1 hour chart, the price advances above a bullish 20 SMA, but has met sellers around its 100 SMA, while the technical indicators aim higher above their mid-lines. Some follow through beyond 1.0690 could see the pair advancing up to 1.0760, where the dominant bearish trend is expected to resume. “
For more information, read our latest forex news.

US: Deep impact of NFP on asset prices - BofAML

FXStreet (Delhi) – Research Team at BofAML, suggests that with the much-anticipated 16 December FOMC meeting around the corner, the 4 December US non-farm payrolls (NFP) is one of the most important remaining data points and the significance of recent NFP surprises in driving asset prices has been increasing since summer 2014 and is near historical highs.

Key Quotes

“During the previous hiking cycle the importance of NFP surprises rose ahead of the first hike and continued to rise until the end of the hiking cycle. Despite high anticipation for the next Fed hike, the importance of the employment report could remain elevated even after the initial liftoff. This relationship is particularly pronounced now as the Fed has adopted a data-dependent stance, and each NFP report will likely continue to play a key role in informing the path of subsequent Fed policy decisions.

Equity divergence from rates and FX: In past hiking cycles, financial assets all became more correlated to NFP surprises heading into the initial hike as the market began anticipating Fed policy changes. Currently, the importance of NFP surprises is elevated for USD pairs and rates, but low for equities. This is an important divergence from the previous hiking cycle when all three asset classes exhibited consistent reactions to NFP surprises.

As a contrarian trade, we favor buying a EURUSD 3m 1.10 call with a 16Dec window at 1.1050 as a hedge against a potential Fed policy mistake.

US rates strongly correlated to NFP: Treasury yields have historically been more correlated to NFP surprises than either FX or equities. Perhaps this is because bond investors are more sensitive to potential changes to Fed policy and therefore react faster. However, the current sensitivity for FX currently rivals that of bonds, which highlights the FX market focus on central bank divergence.”
For more information, read our latest forex news.

Pricing for Fed’s December move on the rise – Westpac

FXStreet (Delhi) – Sean Callow, Research Analyst at Westpac, suggests that pricing for a Fed’s Dec move has risen above 70% and robust job creation points to ongoing tightening in 2016 but this is not translating to faster wages growth so inflation still argues for a cautious approach.

Key Quotes

“The FOMC held steady in Sep, seemingly spooked by the Aug CNY devaluation and steep slides in China’s stock market which spilled over to Wall St.”

“But the recovery in EM and US equities in October produced a virtual “all clear” from the FOMC on 28 Oct. The statement’s reference to a potential rate increase at the “next meeting” has since been reinforced by commentary from many officials.”
For more information, read our latest forex news.

JPY: PM Abe plans minimum wage hike of 3% - Nomura

FXStreet (Delhi) – Research Team at Nomura, notes that the Japanese PM Abe has planned to implement minimum wage hike of 3% in an emergency response measure which are proposed for realizing strong economy.

Key Quotes

“The measures, part of an effort to attain nominal GDP of ¥600trn by around 2020, fell into one of five categories, including promotion of investment and realization of productivity reforms, and stimulation of spending through an increase in wages/minimum wages.”

“We think the proposals generally lacked detail. In the area of corporation tax reform, there is a proposal to set the stage for the tax rate to be revised below 30% as soon as possible, but no target date for attaining this is included. On wage increases, the proposal only says wage increases are hoped for in view of record-high corporate earnings.”

Prime Minister Abe reveals policy of targeting minimum wage CAGR of 3%: According to Nikkei Quick News, Prime Minister Shinzo Abe said at the council meeting that minimum wages need to be raised at an annual rate of about 3%, and he wants the nationwide weighted average minimum hourly wage to be raised to ¥1,000. A 3% increase in the current nationwide weighted-average hourly wage of ¥798 comes to an increase of just under ¥24.”

“Of the 56.7mn employees, 4% are affected by an increase in the minimum wage. If we assume they work an average of 7.7 hours a day and 226 days a year, the boost to total employee income comes to just under ¥100bn a year. This is less than 0.1% of annual household disposable income of more than ¥280trn and is unlikely to have much of a macroeconomic effect. If minimum wages were to continue rising 3% a year, the percentage of workers affected by the increase would grow over time, and the effect on consumer spending could become more noticeable.”

“If the minimum wage were to be raised 3% a year, a minimum wage of ¥1,000 would be attained in 2023, over which time the government would have to exert its influence in negotiating the minimum wage. The government's stance reflects its dissatisfaction with wage increases and capex in the corporate sector despite record-high earnings. The government used its influence to negotiate an ¥18 increase in the minimum wage this year, the largest increase since 2002. Minimum wage is generally determined in negotiations between labor unions and management, and we are not sure if the government's target will be attainable, but we will be looking for upside risk to wages.”
For more information, read our latest forex news.

RBA cash rate: market pricing - Westpac

FXStreet (Delhi) – Sean Callow, Research Analyst at Westpac, expects RBA to keep rates on hold at 2% through 2016.

Key Quotes

“The RBA held the cash rate at 2.0% in November for the fifth straight month. The downside surprise on Q3 CPI did not produce the rate cut a minority had expected but the RBA did say that “the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.”

“The RBA’s Nov Statement on Monetary Policy included a forecast of 3% y/y growth by Dec 2016. So long as this is the RBA’s view, they should be content with a 2% cash rate. The main risk to the outlook seems to be from the terms of trade.”
For more information, read our latest forex news.

Japan: Manufacturing PMI posts second straight monthly gain in November - Nomura

FXStreet (Delhi) – Research Team at Nomura, notes that the Japanese manufacturing PMI for November came in at 52.8, rising 0.4pt from October's 52.4, marking the second straight monthly rise after October's 1.4pt, suggesting ongoing improvement in manufacturing activity and further indicating that the economy is firming in FY15 H2.

Key Quotes

“PMI data a mixed bag, but export orders index up for second straight month: Among the five component indices, there were positive contributions to the headline PMI from the output index (+1.5pt, from 52.4 in October to 53.9 in November), the supplier delivery times index (-0.6pt, from 49.8 to 49.2; a fall in this index pushes up the headline PMI), and the employment index (+0.3pt, from 52.4 to 52.7), and negative contributions from the new orders index (-0.2pt, from 54.2 to 54.0) and the stock of items purchased index (-0.7pt, from 50.4 to 49.7). All of that adds up to a mixed bag. The decline in the new orders index points to a possible deceleration in manufacturing activity, through the data is only for a single month.

However, the new export orders index—which is not included in the headline PMI calculations—rose for the second straight month, by 1.0pt (from 52.2 in October to 53.2), which we see as showing the strength of overseas demand, which has a major influence on manufacturing activity.

No increase in stock of completed items; product price index rises: Among other subindices, the order backlog index fell 0.5pt m-m (from 49.8 in October to 49.3 in November), the stock of completed items index fell 1.7pt (from 49.5 to 47.8), the purchasing volume index rose 1.3pt (from 51.8 to 53.1), the purchasing price index rose 0.5pt (from 50.7 to 51.2), and the product price index rose 2.0pt (from 48.5 to 50.5). We think the continued absence of an increase in the stock of completed items along with the rise in the product price index in November suggests manufacturing activity is well balanced.

Further indication of ongoing firming in economy in FY15 H2: The second consecutive quarter of negative growth in Japan's real GDP in Jul-Sep reflected largely a decline in inventories; final demand does not appear to have deteriorated that much. We expect Japan's economy to get back on an expansionary track in Oct-Dec supported by growth in key demand items. The survey of production forecasts also points to companies expecting production to firm. We see the October and November Japanese manufacturing PMI statistics as consistent with this view.”
For more information, read our latest forex news.

Heading towards NFP next week - Key insights - BAML

FXStreet (Mumbai) - Analysts at BAML enlist few observations potentially useful for trading future NFP events based on regression analysis.

Key Quotes:

“The market consensus estimate for NFP tends to have an optimistic bias. Since 1997 when estimates started being collected, the consensus has averaged +100k while the initial release has averaged +86k.”

“Furthermore, the release disappoints expectations 56% of the time. Taken together, investors should temper their expectations somewhat for the upcoming report.”

“Our regression analysis also quantifies the expected reaction to different levels of NFP surprises and generates a few observations potentially useful for trading future events.”

“Since 2012: Among liquid G10 pairs EURUSD and USDJPY exhibit consistent reactions to NFP surprises, tending to move 0.7% in favor of the USD for a +100k surprise. Somewhat surprisingly, AUDUSD is the least consistent among G10 USD pairs.”

“USDZAR and gold tend to be the most sensitive overall.”

“Oil and equities have R-squared near zero, suggesting the market is concerned about the growth implications of a December hike. In previous hiking cycles, positive NFP surprises were beneficial for oil and equities as they signaled economic expansion.”

“This time, the concern of higher rates deterring global growth is causing a break from the historical relationship.”

“10y Treasury yields tend to sell off 8bp on +100k surprises.”
For more information, read our latest forex news.

AUD/USD sits at monthly highs, 0.7300 in sight

FXStreet (Mumbai) - AUD/USD extends its bullish momentum into the mid-Asian trades, and trades near monthly highs, as rebounding commodity prices continue to underpin the resource-linked Aussie.

AUD/USD trades above all major DMAs

Currently, the AUD/USD pair trades 0.17% higher at 0.7268, testing fresh four-week highs recorded at 0.7275 on Tuesday. The Aussie extends its recovery from hourly 200-SMA into a second day and now looks for a test of 0.73 barrier amid broad based USD weakness and solid recovery in the commodity prices. Gold prices reverted to $ 1080 while the US oil gains 0.51% and nears $43. Copper prices recover to $ 2.06 on Comex.

However, the Aussie struggles to extend further to the upside amid persisting risk-off trades on rising geo-political worries, with Australia’s benchmark S&P/ASX index losing -0.33% to 5,209.

In the day, ahead, the commodity-currency will continue to track the performance across the commodity space ahead of a flurry of US dataflow, which may bring fresh incentives for the greenback.

AUD/USD Levels to watch

The pair has an immediate resistance at 0.7300 (round number), above which gains could be extended to 0.7330/41 (daily R2/ Oct 16 High) levels. On the flip side, support is seen at 0.7236 (5-DMA) from here it to 0.7203 (1h 100-SMA).
For more information, read our latest forex news.

USD/JPY heading towards key support at 122.20

FXStreet (Mumbai) - The rising threats to global security paired with heightening geopolitical risks kept the demand for safe-havens intact, thereby driving the Japanese yen to fresh one-week high on 122 handle.

USD/JPY fails near hourly 20-SMA and retreats

Currently, the USD/JPY pair drops -0.18 to 122.30, hovering close to fresh weekly lows posted at 122.26 in last hours. The Japanese currency continues to push higher versus its American rival, extending gains for the second straight session, as investors scramble for safety assets amid persisting risk-off markets on escalating geo-political risks surrounding the Middle-East after Turkey shot down a Russian jet on Air-space violation issues.

Further, the USD/JPY pair remains under pressure as the greenback extends its technical correction across the board while lower US treasury yields also add to the downside. The USD index loses -0.21% to 99.48, miring near session lows.

Amid lack of economic news this session, attention now shifts towards a host of key US macro releases due later today. The US durable goods data will kick-off a fuller US calendar followed by Core PCE index, personal spending, new home sales and finally revised consumer sentiment will wrap up the week. US markets remain closed tomorrow in observance of Thanksgiving Day.

USD/JPY Technical levels to watch

The prices trade near session lows and finds immediate support at 122.20 (Nov 16 Low) below which 121.70 (200-DMA) would be tested. To the topside, the immediate resistance is located at 122.47 (1h 20-SMA). A break above the last, the major could test 122.70 (5 & 20-DMA).
For more information, read our latest forex news.

Asian stocks slide amid rising geo-political tensions

FXStreet (Mumbai) - The stocks on the Asian bourses extend losses from the previous session, shrugging off a positive close on the Wall Street overnight, as investors fretted over escalating geo-political tension in the Middle-East after a Russian fighter jet was shot down by Turkey near the Syrian border on Tuesday.

Adding to the negative sentiment, worldwide travel alerts were issued by the US over potential increase in terrorism threats.

Nikkei faces double whammy

The Japanese markets extended weakness into a second day and received double blow after renewed risk-aversion wave hit markets while a stronger yen versus the greenback hurt the exporters’ stocks. USD/JPY drops -0.20% to 122.27 while the Nikkei loses -0.52% to trade at 19,822.

The Australian benchmark, the S&P/ASX came under renewed selling and drops -0.52% to 5,198 points, weighed down by heavy losses in banking and airline stocks. However, capping the downside in the index, the resource stocks are trading higher on the back of the ongoing recovery in commodity prices.

While the Chinese indices also follow suit and keep losses, with Shanghai Composite (SSEC) muted around 3,615. China’s A50 index declines -0.60% to 10,574 points. Hong Kong’s Hang Seng loses -0.46% to 22,483.
For more information, read our latest forex news.

US Dollar under pressure across the board

FXStreet (Bali) - Today's US Dollar performance during Asia is a re-play of what we witnessed during the same time last Tuesday, with broad-based weakness in the currency dominant ahead of US Thanksgiving on Thursday, with weakness not being attributed to any particular fundamental drivers.

USD pressured in Asia

EUR/USD has surged all the way to 1.0675, after a successful buying campaign originated sub 1.0650 as Tokyo traders came online. Meanwhile, USD/JPY is in the midst of breaking a key support area at 122.30, while the Aussie is re-testing recent session highs at 0.7275.

Aussie underpinned by base metals

As per inter-correlated markets, gold has taken-off towards 1,080.00, threatening a re-test of yesterday's high at 1081.50. Copper is consolidating recent solid gains circa 2.067. The metal-base performance continues to support the upside in the Aussie.

Plenty of US data today

Looking ahead, the next US session is packed with data ahead of the Thanksgiving break. As David Fritz, FX Strategist at Nomura, notes: "Durable goods, personal income and spending, PCE deflator, University of Michigan consumer sentiment, and new home sales will all be released on Wednesday. Previously reported data on manufacturing and production suggest that manufacturing activity could stabilize soon, and, given the data, our economists expect durable goods orders to have risen by 1.6% in October. Personal income likely grew at a strong pace in October, based on NFP growth during the month, with our economists looking for a 0.6% rise."
For more information, read our latest forex news.

Japan to grow by 0.5%-1.5% in 2016 - Moody's

FXStreet (Bali) - Moody's expects 0.5%-1.5% GDP growth in Japan in 2016, noting that muted domestic and global GDP growth will support broadly stable earnings for Japan's (A1 stable) non-financial corporates in 2016.
For more information, read our latest forex news.

AUD/USD: pressing higher - ANZ

FXStreet (Guatemala) - Analysts at ANZ noted that AUD/USD pushed back above USD0.72 as global sentiment continued to improve.

Key Quotes:

"The rise mirrored a more positive session for stocks, and a strong rally in industrial commodities. That said, the move was not driven by fundamentals. RBA Governor Stevens delivered a speech on the long term which had a relatively dour tone, while iron ore prices continued to slide, bucking the broader commodity trend. The CAPEX survey later this week remains the key domestic event."
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EUR/USD: watch dowside below 1.0580

FXStreet (Guatemala) - EUR/USD is consolidated on the hourly chart and capped by the 100 SMA while recovery attempts are shallow and lack conviction. There were however a number of data releases that may have an impact further down the line when it comes to decision making.

In Germany, the final Q3 GDP reading came in line with expectations, as the economy grew 0.3. The IFO survey showed that local business confidence increased to 109.0 in November, from 108.2 in October vs last month's drop.

For the US, the trade deficit in October was an improvement and there was also an upward revision of the Q3 GDP at 2.1% vs the first estimate of 1.5%. However, worse-than-expected November consumer confidence that down to 90.4 from a previous 99.1 wasn't supportive and left markets awaiting the Durable Goods orders tomorrow instead ahead of the Thanksgiving holidays and thin markets.

EUR/USD levels

Technically, analysts at UOB Group explained, that the sudden reversal last Friday clearly indicates that the recent short-term upward momentum has fizzled out. "While the current weakness could extend lower, we prefer to see a daily closing below 1.0580 before adopting a bearish stance. That said, only a move back above 1.0660 would indicate that the immediate downward pressure has eased."
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