Wednesday, September 16, 2015

Asia-The calm before Fed storm, UK jobs report, US CPI – key

FXStreet (Mumbai) - A cautious tone was widespread across Asia as the 2-day Fed gathering commences later today. Markets witnessed increased bids for traditional safe-havens such as JPY, EUR, CHF and gold amid a light rally in Asian indices.

Key headlines in Asia

RBA's Debelle: Medium-term Australian growth rate may have slowed

Asian markets rebound ahead of Fed

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

Broad based USD retreat was the underlying theme in Asia, with markets favoring safety assets ahead of the Fed verdict. Asian traders resorted to positions unwinding across the financial markets, resulting in a rebound in the Asian stock markets and a broadly lower greenback.

The Japanese yen, euro and the Swiss franc were better bid against the US dollar as traders locked-in profits on their USD longs after the recent rally. USD/JPY trades around 120.20, down -0.16%, while EUR/USD gains 0.20% to trade at 1.1290 levels.

The Antipodean currencies trades largely muted, consolidating to the upside after solid gains seen on Tuesday. The Aussie recovered from a dip led by RBA’s Debelle’s comments that Australia’s medium-term growth rate has slowed and reverted to 0.7150 levels. While the Kiwi oscillates around 0.6350 levels as traders digest the positive Fonterra news. Dairy prices surged an average 16.5% at Fonterra's Global Dairy Trade (GDT) auction on Tuesday, following a 10.9% rise at the previous auction, and a 14.8% increase two auctions prior.

On the equities front, the Asian markets witnessed a relief rally, with the Japan’s benchmark index, the Nikkei, extending gains to 18,180, up 0.85%. While the Hong Kong's benchmark Hang Seng index gains nearly 1% to 21,663 and the Shanghai Composite defends mild gains to 3,010. The benchmark Australian S&P/ASX 200 advanced 1.5% to 5,091.

Heading into Europe - centered on EUR, GBP

A busy EUR macro calendar ahead, with the UK employment report and Euro zone final CPI expected to have limited impact.

The UK will publish labor data for July. The main ILO 3-month unemployment rate is expected to remain at 5.6%, the same as in June.

Consumer prices in the euro zone are seen flat in August, on a monthly basis, compared to a negative 0.6% result in the previous month, and with a 0.2% gain expected y/y after the 0.2 advance reported a month ago.

Looking towards the New York session, the Fed policymakers gathering in Washington on Wednesday will be greeted by fresh economic news - inflation data due to be released.

The US CPI is expected to have risen a mere 0.2% over the year ending August. Markets are predicting that the rate of core inflation actually picked up to 1.9% in August y/y, following a 0.1% increase in prices last month.

EUR/USD Technicals

The AceTrader Team explains, “Euro's rally to 1.1350 last Friday and then 1.1373 on Monday signals the rise from last Thursday's trough at 1.1087 to retrace the decline from August's peak at 1.1715 remains in progress and consolidation with upside bias would be seen for gain towards 1.1360/65, then marginally higher. However, loss of momentum would prevent strong rise above there and reckon resistance at 1.1401 would hold and yield a much-needed correction later.”

“On the downside, only below 1.1229 (previous resistance, now support) would indicate a temporary top has been made and yield stronger weakness towards 1.1172.”

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