FOREX: USD - BBDXY Dragged Lower With USD/JPY, Can London Differentiate ?
The BBDXY has had a range today of 1216.55 - 1218.42 in the Asia-Pac session; it is currently trading around 1217, -0.05%. Risk has turned very quickly to start the week in Asia thanks to a combination of poor Chinese PMI’s over the weekend and Japanese yields continuing to extend higher as the market prices in a potential December BOJ rate hike. The USD moved lower initially as Asia tends to follow the moves seen in USD/JPY, I suspect we might see this start to differentiate once London comes in. On the day I will be watching to see if the USD can bounce against risk currencies should this risk-off start to the week expand on its initial moves. On the day resistance is back towards the 1222-1224 area where sellers should remerge initially, a sustained break back above here and the market would again turn its focus to the pivotal 1230-1240 area.
- EUR/USD - Asian range 1.1590 - 1.1616, Asia is currently trading 1.1600. The pair is consolidating around 1.1600. On the day I will be watching to see if price stalls toward the 1.1600-25 area as risk turns lower. If price fails up here then look for a retest of the 1.1545-50 support.
- GBP/USD - Asian range 1.3222 - 1.3249, Asia is currently dealing around 1.3230. The pair is consolidating its recent gains around 1.3250. I remain skewed toward shorts but I feel this move does signal the need to be patient. On the day GBP needs to hold above 1.3200 to attempt to extend higher so watch for a break sub 1.3180-1.3200 area which could signal the correction higher has stalled.
- Cross asset : SPX -0.70%, Gold $4240, US 10-Year 4.036%, BBDXY 1217, Crude Oil $59.60
- Data/Events : Germany HCOB Germany Manufacturing PMI, France HCOB France Manufacturing PMI, Spain HCOB Spain Manufacturing PMI, EZ HCOB Eurozone Manufacturing PMI, Italy HCOB Italy Manufacturing PMI/Budget Balance
Fig 1: BBDXY Spot 4H Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
