FOREX: USDJPY Edges Through 20-day EMA Support
- USDJPY edges through the 155.26 20-day EMA support in recent trade after finding support at that level previously. Renewed pressure on the pair here would expose the 50-day EMA at 153.06 for direction - a level that could come into play should the pick-up in volumes at the NY crossover extend the hawkish JPY move.
- Ueda's comments overnight (namely his statement that raising rates should be seen as easing off the accelerator, rather than applying the brakes) keep December BoJ hike speculation in play, evident in market pricing for a hike rising to ~80% - up from around ~60% Friday. Perhaps notably, Ueda has also scheduled a speech to take place on December 25th - one week after the BoJ decision.
- The USD Index remains inside the S/T downtrend posted off the late November high (100.395), with support expected into the 98.992-99.063 area, which could contain any further decline in USDJPY.
- AUDUSD has pierced short-term trendline resistance at 0.6550, drawn from the Sep 17 high, after trading through its 20- and 50-day EMAs, undermining a recent bear theme. Current levels would mean the 7th consecutive session of gains for the pair. With the RBA cutting cycle likely over, AUD drivers ahead will be centred around global risk sentiment and the CNY - which continues to trade in a resilient fashion at fresh cycle highs against the dollar despite fresh property market woes reminding of concerns to the Chinese medium-term macro outlook.
- EUR meanwhile outperforms this morning after the November manufacturing PMIs highlighted renewed divergence between Germany/France and the rest of the region. EURUSD has breached both the 20- and 50-day EMAs, however, key short-term resistance to monitor is 1.1656, the Nov 13 high and a bull trigger.
- ISM Manufacturing will be the key datapoint today as private sector data remains more timely than the still-catching-up government stats. The USD Index remains inside the S/T downtrend posted off the late November high (100.395), with support expected into the 98.992-99.063 area, which could contain a further decline in USDJPY. BoE's Dhingra is also scheduled for today, and should be expected to remain with her dovish stance, while UK PM Keir Starmer is currently delivering a televised speech, addressing last week's Budget.
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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.
