Monday, November 23, 2015

Broad based USD strength – key theme in Asia, EU PMIs eyed

FXStreet (Mumbai) - The latest chatter ahead of the Fed announcement due later in the NY session resulted in a renewed USD rally across the board, which triggered volatility amid a data-quiet Asian session. The commodity-currencies suffered heavily in Asia on the back of the ongoing rout in base metals and oil prices.

Key headlines in Asia

Fed may hike the discount rate today - Chatter

Japan considering to boost minimum wage by 3% - Nikkei

Fed's Williams: Strong case for a December rate hike

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

All the Asia-pac currencies were relentlessly offered in Asia as the US dollar extended its bullish run in to fresh multi-month highs on news that the Fed is likely to hike the discount rates later today. Such a move raised bets for a Dec Fed rate lift-off and thus bolstered the buck. USD/JPY extended to the upside and took out hourly 100-SMA to now trade around 123.25, with August highs on sight.

Both Antipodeans halted their last week’s winning streak and came under heavy selling pressure as the renewed sell-off across the commodities board added to the ongoing greenback and hence, dragged the OZ currencies lower. The Kiwi was dumped to 0.65 handle, while the Aussie hovers below 0.7200 levels, both losing nearly 0.80% so far.

The Asian stocks trade higher, with Japan’s benchmark, the Nikkei closed on account of a national holiday. While mainland China’s benchmark, the Shanghai Composite trades 0.39% higher around 3,645 points. Australia’s S&P ASX index closes at 5,271, up 0.29% on the day. Hong Kong’s Hang Seng trades muted around 22,728.

Heading into Europe & the US

After a data-thin Asian session, we have an eventful EUR calendar for today, with a raft of flash services and manufacturing PMIs from across the Euro area likely to be reported. While ECB board member Daniele Nouy is scheduled to speak at the conference in Frankfurt, Germany. ECB board member Sabine Lautenschläger will speak in the session ahead.

The EU flash manufacturing PMI shows 52.2 for November, a tad lower than the 52.3 recorded previously while the services sector is expected to remain unchanged from the final 54.1 seen last month.

Germany ‘s flash manufacturing PMI for is expected to tick lower to 51.8 points, against final 52.1 figure recorded in October, while the index for the services sector is also expected to show a decline to 54.3 from 54.5 recorded in Oct.

Looking towards the NA session, the main event is expected to remain the Fed announcement with markets widely anticipating the Fed to increase the discount rates that it charges other banks for lending. Data-wise, the US manufacturing PMI and existing home sales report will be watched for further USD moves. The existing home sales data from the US is expected to show the rate of sales expected to moderate to 5.4 million in October from September's 5.55 million booked in Sept.

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “Technically, the daily chart shows that that the price remains well below a sharply bearish 20 SMA, whilst the Momentum indicator has turned flat well below its 100 level after correcting oversold readings, whilst the RSI indicator is resuming its decline around 32. In the 4 hours chart, the pair presents a neutral-to-bearish stance, given that the price has been hovering back and forth around a horizontal 20 SMA, while the technical indicators present tepid bearish slopes around their mid-lines. Support levels: 1.0630 1.0585 1.0550 Resistance levels: 1.0710 1.0750 1.0790.”
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