NZD, JPY better bid, GBP soft pre-Jobs & QIR
Asian markets traded in quiet fashion, little price action followed slow New York session. The Kiwi recorded the largest gains verse USD overnight; NZDUSD recovered fast from unsurprising dovish RBNZ comments. RBNZ Wheeler said it won’t remove the mortgage lending restriction for now as the inflation risks remain high “particularly in light of strong immigration costs”. NZDUSD retraced NY gains, rebounded from 0.7794 to break above the 21-dma (0.7846). Despite NZD-negative comments, NZDUSD pick-up momentum on broad USD weakness. Resistance is seen at 0.7938/0.8034 (Fib 23.6% on Jul-Nov drop / Oct 21st high). Large option bids at 0.7810/20/80 should give further support today.
In Japan, the jitters around a potential snap election and delay in the second round of sales tax hike drive the FX markets. JPY crosses softened in Tokyo as the Cabinet Secretary denied media reports on delayed taxes. USDJPY saw resistance at yesterday’s 116.10. Deeply oversold JPY is expected to lose some support due to eco-political uncertainties. Light option bids trail above 115.00/25, offers dominate below 113.80/114.00 zone. EURJPY extends gains to 144.71. The key resistance stands at 145.69 (Dec 27th high). GBPJPY advances to fresh 6-year high of 184.68, the cross is subject to UK event/data risk today. Given the strong bull momentum, the downside attempts are seen limited at 179.80/181.00 area.
GBP/USD trades ranged before the labor data (09:30 GMT), Quarterly Inflation Report and BoE Governor Carney’s press conference (10:30 GMT). Markets anticipate improvement in jobless rate, with slight increase in wages in October. BoE’s Carney is however expected to maintain his strict dovish stance on the monetary policy, after having aggressively cut the wage growth forecasts in May QIR and having recently voiced concerns on moderate recovery in the Euro-zone, UK’s leading trade partner. The GBP sentiment is skewed on the downside. GBPUSD option barriers abound below 1.5875/1.5900 for today expiry. EURGBP trades ranged between 0.7800/0.78700. A broad sell-off in GBP should send the pair into its daily Ichimoku cloud cover (0.78683/0.79163)
USD/RUB pared Monday gains amid exports unexpectedly declined from 40.9 billion to 38.8 billion dollar in September, the trade surplus retracted to 13 billion dollar. The combination of weak oil prices, sizeable RUB depreciation and Western sanction should further deteriorate Russia’s balance of payments. We expect a re-test of 48/50 offers.
The key highlight of the day is UK Jobs data and Quarterly Inflation Report. Traders also watch German Wholesale Price Index m/m & y/y, Euro-zone September Industrial Production m/m & y/y, Canadian October Teranet/National Bank HPI m/m & y/y, US September Wholesale Inventories & Wholesale Trade Sales m/m.
Ipek Ozkardeskaya – Market Analyst:
“In Japan, the jitters around a potential snap election and delay in the second round of sales tax hike will continue driving the FX markets. Deeply oversold JPY should lose some support due to eco-political uncertainties. It is big time for JPY to retrace post-BoJ losses.”
“Russian trade data has been the key macro highlight of the week. Exports unexpectedly declined from 40.9 billion to 38.8 billion dollar in September, the trade surplus retracted to 13 billion dollar. The combination of weak oil prices, sizeable RUB depreciation and Western sanction should further deteriorate Russia’s balance of payments. We expect a re-test of 48/50 offers.”
“The volatilities in BRL are expected to pick-up as freshly re-elected President Dilma Rousseff is preparing to build her new economic team. The 1-month implied vol rebound has further to develop. The three month future premiums are at the highest levels since mid-2008. This means that the rate differential is clearly offset by political jitters and FX risks. The tensions and high vols are expected to drive the Real levels until we get some more clarity on the new government. We remain long gamma as we see more potential for higher vols.”
Luc Luyet, CIIA – Senior Market Analyst:
“EUR/USD is rebounding from its recent 2-year lows. The resistances to monitor for this temporary counter-trend move are likely given by 1.2577 (04/11/2014 high) and 1.2639 (30/10/2014 high). In the longer term, the underlying downtrend is unlikely over and should push prices towards 1.2000 in the next months.”
Sorry. No data so far.