FXStreet (Mumbai) - Re-emergence of risk sentiment was the main theme in Asia today, with the riskier assets such as the equities and higher yielding – Antipodean currencies benefiting the most. While the yen was offered on the back of weak Japanese fundamentals.
Key headlines in Asia
Growing pressure for Japan to finance its debt - Moody's
Australia Building Permits (MoM) came in at -6.9% below forecasts (-2%) in August
NZ Sept business confidence stopped free-falling - ANZ
Dominating themes in Asia - centered on JPY, AUD, NZD
Asian equities bounced-back in full swing in Asia, recovering from Tuesday’s massive sell-off, on favorable sentiment towards risky assets. However, the US dollar remained subdued against its major competitors as markets remain cautious ahead of the key employment report and Fed Yellen’s speech due later today.
The Japanese yen lost ground and edged lower versus the US dollar as weak Japanese retail sales and industrial production data weighed on the yen. USD/JPY now trades 0.13% higher at 119.90 levels. Japan’s retail sales were up 0.8% y/y in August, missing expectations for an increase of 1.2%, against a 1.8% jump in July. While the industrial output fell 0.5% m/m in August, missing estimates of a 1.0% rise in output.
Antipodeans remained strongly bid in Asia, with the Aussie staging a solid rebound from fresh multi-week lows struck on Tuesday. AUD/USD swung back higher into the positive territory amid ripening risk-sentiment, gaining 0.44% at 0.7016. While the Kiwi also tracked its OZ counterpart higher after the NZ business confidence gauge halted its free-fall in September.
On the equities space, Asian markets rebounded higher, with Japan’s Nikkei emerging the biggest gainer, up 2.78% to 17,400. Australia’s S&P ASX index rallies 1.38% to 4,986. While the Chinese indices, the Shanghai Composite advances 0.70% to 3,059. While Hong Kong’s markets advance 1.70% at 20,903.
Heading into Europe - centered on EUR, GBP
A busy European session on Wednesday for the EUR, GBP traders as the crucial macro data are lined up release in the session ahead.
The German retail sales data will kick-start an action-packed EUR calendar, with the markets predicting a 0.4% gain on a monthly basis, following the 1.4% gain in July, and a 3.4% rise y/y after rising 3.3% in July.
Subsequently, Germany will report employment data for September, with the unemployment rate expected to remain at 6.4%, after the same rate recorded in August.
The UK 3rd GDP estimate for Q2 will be followed with expectations of a 0.7% growth in Q2 q/q while annual GDP growth is expected to show 2.6% expansion, the same as in the 2nd estimate.
Next in line, the euro zone will publish its August inflation data estimate, with CPI expected to show a flat reading y/y. In August, consumer price growth in the euro zone reached a 0.2% annual level.
The euro zone will also report its August labor data. The unemployment rate is expected to stay unchanged at 10.9% in August.
The North American session ahead holds key economic news from the US and Canada, which will be closely eyed. Canada is due to report its GDP m/m with markets is expecting a softer reading for July, with an estimate of a 0.2% gain.
The US calendar as the crucial ADP employment change and Chicago PMI reports ahead of the much-awaited Fed Chair Yellen’s speech. Yellen is scheduled to deliver opening remarks at the Federal Reserve's annual community banking conference, in St. Louis.
EUR/USD Technicals
Valeria Bednarik, Chief Analyst at FXStreet noted, “The short term picture is mild bearish, given that the price is hovering around a horizontal 20 SMA in the 1 hour chart, whilst the technical indicators head lower below their mid-lines, yet as long as above the 1.1200 level, the declines should remain limited.”
“In the 4 hours chart, the technical stance is bullish, as the price is above its 20 SMA that anyway lacks directional strength, whilst the technical indicators are turning slightly higher in neutral territory. In this last time frame, the price is now around its 100 and 200 SMAs, both together and horizontal, reflecting the lack of directional strength.”
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