KRW: Rhee- Will Intervene If See Excessive Moves, Policy Outlook Data Dependent
Spot USD/KRW sits off earlier highs around 1470. We were last 1467, with some help for the won coming from lower USD/JPY levels (amid fresh FX jawboning from the Japan FinMin). BoK Governor Rhee was also interviewed by BBG. ON FX Rhee noted that: "*RHEE: WHEN WE SEE EXCESSIVE MOVEMENT WE'RE WILLING TO INTERVENE, *RHEE: FX MARKETS EXCESSIVELY SENSITIVE TO RECENT UNCERTAINTIES as well as "*RHEE: HARD TO JUDGE IF WON REFLECTING FUNDAMENTALS" (via BBG). These don't point to a line in the sand that we have seen in the past (when the authorities have stated they are observing herding behavior in FX markets)> Still, as we have noted in recent sessions, moves towards recent highs near 1480 for USD/KRW create the risk of a policy response.
- On the monetary policy outlook. Rhee noted that while the official bias is to ease policy, given the negative output gap, he added: “But the magnitude and timing of the cut or even the change of direction will depend on the new data that we’ll see.”
- He added the central bank will update its thinking at the Nov policy meeting (due on the 27th).
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GBPUSD TECHS: Bearish Condition
- RES 4: 1.3789 High Jul 1 and key resistance
- RES 3: 1.3726 High Sep 17
- RES 2: 1.3661 High Sep 18
- RES 1: 1.3443/3527 20-day EMA / High Oct 1 and a pivot level
- PRICE: 1.3355 @ 06:46 BST Oct 13
- SUP 1: 1.3262 Low Oct 10
- SUP 2: 1.3254 Low Aug 4
- SUP 3: 1.3142 Low Aug 1 and a key support
- SUP 4: 1.3041 Low Apr 14
A short-term bear condition in GBPUSD remains intact and last week’s extension down has strengthened this condition. The pair has breached a key short-term support at 1.3333, the Sep 3 low. The break signals scope for a deeper retracement. A clear break of 1.3280 (pierced), a Fibonacci retracement, would open key support at 1.3142, the Aug 1 low. Initial resistance to watch is 1.3443, the 20-day EMA.
EUROZONE ISSUANCE: EGB Supply – W/C 13 October (1/2)
The ESM is likely to hold a syndication while the Netherlands, Italy, Germany, Spain, France and potentially Greece will all hold auctions this week. We pencil in issuance of E38.0bln for the week, up from E20.5bln last week. There is also the potential for a Slovakian syndication, but we think the W/C 20 October is slightly more likely.
- The ESM sent an RFP (Request for Proposal) last Wednesday. This likely means a transaction today / tomorrow is likely. We pencil in a transaction of around E1.25bln (E1.0-1.5bln). The annual funding target was for E7bln and so far there have been 3/10-year EUR issues for E2bln each and a 5-year USD issue for USD2bln.
- The Netherlands will look to kick off auction issuance for the week tomorrow with E2.0-2.5bln of the 0% Jul-31 DSL (ISIN: NL00150006U0) on offer.
- Italy will then come to the market tomorrow to hold a 3/7/15 year BTP auction. On offer will be E1.00-1.25bln of the off-the-run 2.80% Dec-28 BTP (ISIN: IT0005340929), E1.5-2.0bln of the on-the-run 3-year 2.35% Jan-29 BTP
(ISIN: IT0005660052), E3.0-3.5bln of the on-the-run 7-year 3.25% Nov-32 BTP (ISIN: IT0005668220) and E1.25-1.75bln of the on-the-run 15-year 3.85% Oct-40 BTP (ISIN: IT0005635583). - Germany will conclude issuance for tomorrow with E5.5bln of the new Dec-27 Schatz (ISIN: DE000BU22114) on offer. The coupon will be announced this morning.
GOLD TECHS: Fresh Cycle High
- RES 4: $4161.7 - 2.764 proj of the May 15 - Jun 16 - 30 price swing
- RES 3: $4113.5 - 2.618 proj of the May 15 - Jun 16 - 30 price swing
- RES 2: $4100.0 - Round number resistance
- RES 1: $4078.2 - Intraday high
- PRICE: $40777.0 @ 06:42 BST Oct 13
- SUP 1: $3944.9 - Low Oct 9
- SUP 2: $3836.5 - 20-day EMA
- SUP 3: $3717.6 - Low Sep 24
- SUP 4: $3659.9 - 50-day EMA
A bull cycle in Gold remains intact and today’s fresh cycle marks a bullish start to this week’s session. The move higher maintains the price sequence of higher highs and higher lows. Sights are on the $4100.00 handle, and $4113.5, a Fibonacci projection point. Note that the trend is in overbought territory. A move down would be considered corrective and would allow the overbought set-up to unwind. Support to watch is $3836.5, 20-day EMA.
