FOREX: USD - BBDXY Slightly Lower In Asia

The BBDXY has had a range today of 1225.29 - 1226.35 in the Asia-Pac session; it is currently trading around 1225, -0.05%. The USD continues to build on its recent gains eking out new highs every day, what stood out was with risk turning lower the USD gained some tailwinds as its status as a “safe haven” looks to have been reinstated. The 1230 area remains tough resistance, only a sustained close back above 1230 would start to challenge the conviction of the longer-term USD shorts. Risk/Reward does still favour fading this moving initially but the price action is starting to look more constructive as higher lows are being made and the dips remain very shallow pointing to a reduction in shorts. A sustained move back above 1230 would potentially signal a medium term low is in place and a deeper pullback is on the cards.

• EUR/USD -  Asian range 1.1479 - 1.1498, Asia is currently trading 1.1490. The pair has broken back below1.1500, and I suspect rallies will now be sold into with the first resistance back toward 1.1550-1.1600. The next target is the 1.1350/1.1400 support; a break below this could signal a deeper correction toward the 1.1100/1.1200 area.
• GBP/USD - Asian range 1.3010 - 1.3028, Asia is currently dealing around 1.3020. The pair broke through its support around the 1.3150 area and extended lower overnight. I continue to favor fading rallies though as GBP looks like it has put in a medium term top. First sell zone back toward 1.3150 and then the 1.3300 area.
• Cross asset : SPX -0.15%, Gold $3960, US 10-Year 4.0680%, BBDXY 1225, Crude Oil $60.45
• Data/Events : Italy New Car Registrations/HCOB Italy PMI’s/Retail Sales, France Industrial Production/Manufacturing Production/HCOB France PMI’s, Spain HCOB Spain PMI’s, Germany Factory Orders/HCOB Germany PMI’s, EZ HCOB Eurozone PMI’s/PPI

Fig 1: GBP/USD Spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

The NZD/USD had a range of 0.5631 - 0.5659 in the Asia-Pac session, going into the London open trading around 0.5655, +0.20%. The NZD has actually drifted higher in our session, this after a poor NZ Unemployment print and Asian stocks collapsing. This price action potentially points to the market already being positioned short, though some decent option expiries that are close could also be playing a part. The NZD stands out as a vehicle to short against a resurgent USD but it is worth noting that because of the size of the market it can very quickly become all positioned the same way. I think the USD will need to do the heavy lifting and break above its pivotal resistance for the NZD to test the 0.5500 lows. Should this correction in risk have more room to move lower then I suspect the NZD will remain a sell on rallies with the first resistance back toward the 0.5725-0.5750 area.

• MNI BRIEF: New Zealand Unemployment 5.3% In Q3. The underutilisation rate edged up to 12.9% from 12.8%, while the employment rate eased to 66.6% from 66.8%. The Reserve Bank of New Zealand expects unemployment to reach 5.2% by December.
• “RBNZ GOVERNOR HAWKESBY: HOUSE PRICES AND CREDIT GROWTH NOT RAISING RED FLAGS, SO CAN HAVE MORE BASELINE MORTGAGE LOAN-TO-VALUE RATIO SETTINGS" - RTRS
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5650(NZD1.1.4b Nov 5), 0.5675(NZD1.27b Nov 5), 0.5750(NZD604m Nov 5). Upcoming Close Strikes : 0.5730(NZD496m Nov 6), 0.5780(NZD305m Nov 6) - BBG
• Tomorrow, the local calendar will see the RBNZ at the Select Committee to discuss the FinStab Report, and the Government will release its 3-Month Financial Statements.

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The USD/JPY range today has been 152.96 - 153.75 in the Asia-Pac session, it is currently trading around 153.45, -0.15%. The pair has pulled back from the 154/155 area as the Yen gets bought heavily in the crosses on the back of the pullback in risk, the collapse in Asian stocks today added to its headwinds. While this backdrop plays out I suspect the resistance around the 154/155 area should continue to offer solid resistance. Look for dips to continue to be supported while above 149-150, first support is toward the 151.50/152.00 area and then the more important 149.00-150.00 level.

• MNI: BOJ Minutes: More Than Two Members Positive On Hike. One Bank of Japan board member, apart from the two who proposed raising the policy rate to 0.75%, said it was time to consider another increase as more than six months had passed since the last hike, minutes of the Sept 18-19 meeting showed Wednesday.
• However, the member noted that uncertainty remained over the pace of the U.S. economic slowdown and said it was appropriate for the Bank to maintain its current policy stance for the time being.
• Options : Close significant option expiries for NY cut, based on DTCC data: 150.65($450m). Upcoming Close Strikes : 155.00($1.81b Nov 6), 155.35($1.38b Nov 6) - BBG.

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P