Euro is rising above 1.18 again awaiting the political developments in Catalonia
Treasury prices extended their fall while yields rose. The US Ten Year yield closed up 4 basis points. The Dollar Index (USD/DXY) eased 0.12% at the close weighed by dismal economic data. The Euro rallied off its lows to finish up 0.2% at 1.1795.
UK Average Earnings Index printed at 2.2%, unchanged from the previous read.
UK Unemployment Rate was the same as forecast at 4.3%
UK Claimant Count Change recorded 1,700 against a forecast of 1,300
Canadian Manufacturing Sales in September rose to 1.6% against a forecast of -0.1% and a previous -2.6%.
US Building Permits slipped to 1.22 million against a forecast of 1.25 million
US Housing Starts were lower than forecast at 1.13 million against 1.18 million.
The yield on the Ten Year US Treasury rose to 2.34% (2.30% yesterday). Germany’s Ten Year Bund yield was up 3 basis points to 0.39%. The yield on UK’s Ten Year Gilt was up 4 basis points to 1.31%. The yield on Japan’s Ten Year JGB was unchanged at 0.06%.
Wall Street stocks rose as corporate earnings beat estimates. All three major US indices closed at fresh record highs, with the Dow up 0.7%.
USD/DXY – slips 0.12% to 93.400 from 93.510 yesterday.
EUR/USD – rallies off lows to finish up 0.2% at 1.1795 (1.1770 yesterday).
USD/JPY – soars to close up 0.65% to 112.95 from 112.22 yesterday.
GBP/USD – ends with mild gains on the back of a weaker US Dollar to 1.3200 (1.3180 yesterday)
AUD/USD – finishes flat at 0.7847 (0.7847 yesterday).
USD/CAD – closes lower on better-than-expected manufacturing sales data to 1.2462 from 1.2526.
Outlook: Overall the Dollar put in a mixed performance with the Yen the worst performer. While the rise in the US Ten year yield was matched by others, Japanese yields were flat. Weaker than forecast US Housing Starts and Building Permits put pressure on the Dollar. The Dollar Index (USD/DXY) traded to an overnight high of 93.80 strong resistance, before settling lower. We should see more of this consolidation for the US Dollar before a more sustained rally. The rise in US yields is the result of changing fundamentals which support the Dollar. The Fed has begun shrinking its balance sheet. It remains to be seen if the other major central banks will follow. Speculative market positioning remains heavily short of US Dollars.
Today’s Events and Economic data:
Australian Employment Change and Unemployment Rate, NAB Quarterly Business Confidence Index: (GMT 12.30 am, Oct 19/Local Time 11.30 am, Oct 19): Employment Change forecast: 15,000 from 54,200; Unemployment Rate forecast: 5.6% from 5.6%; forecast for NAB Q3 Quarterly Business Confidence Index: previous reading was 7
RBA Assistant Governor Michelle Bullock speaks at a function for the Australian Shareholders Association in Sydney (GMT 1.10 am. Oct 19/Local Time 12.10 pm Oct 19)
China Q3 Annualised GDP, September Industrial Production, Fixed Asset Investment, September Retail Sales: (GMT 2 am, Oct 19/Local Time 1 pm, Oct 19: forecast for annualised Q3 GDP: 6.87% from 6.9%; forecast for September Industrial Production, annualised: 6.4% from 6.0%; forecast for Fixed Asset Investment: 7.7% from 7.8%; forecast for September Retail Sales, annualised: 10.2% from 10.1%.
New Zealand’s government will be announced this afternoon (no set time was given).
UK September Retail Sales (GMT 8.30 am, Oct 19/Local Time 7.30 pm, Oct 19) forecast: -0.1% from 1.0%
US Weekly Jobless Claims and Philly Fed Manufacturing Index (GMT 12.30 pm, Oct 19/Local Time 11.30 pm, Oct 19) forecast for Jobless Claims: 240,000 from 243,000; forecast for Philly Fed Manufacturing Index: 21.9 from 23.8
Trading View: The easy move lower in the US Dollar finished last night. From here expect consolidation with more two-way trading. There are more events and economic data due out which will influence the short term trading.
EUR/USD – bounced off its low 1.1730, rallying to a high of 1.1805 before settling at 1.1795. Immediate resistance for the Euro is found at 1.1805 and 1.1820. Short term support lies at 1.1760 and then at 1.1730. Watch for political developments in Catalonia. Likely range today 1.1760-1.1810. Continue to sell Euro rallies.
USD/JPY – finished 0.65% higher as the US Ten year yield lifted. The Dollar traded at high at 113.05, which is the immediate resistance level. Immediate support can be found at 112.60 and then at 112.20. Unlike the other major currencies, the speculative market is short of JPY. The latest CFTC/Reuters report saw an increase in JPY shorts to -JPY 101,419 contracts from -JPY 84,643. Net total JPY shorts are the 4th largest this year. This makes for a bit of caution in USD/JPY at these levels if one is bullish. Likely range today 112.60-113.10. Trade the range.
AUD/USD – finished flat at 0.7847. Yesterday’s trading range was between 0.78189 and 0.7858. Copper ended down 0.6%. The focus today will be on the Employment data. Markets are looking for a gain of 15,000 jobs following the previous strong gain of 54,500.We would need to see a larger gain than 15,000 for the Aussie to rally. Anything less than 15,000 would see further selling pressure on the Aussie. China also releases its Q3 GDP along with Industrial Production, Fixed Asset Investment and Retail Sales. We could be in for some big moves in the Aussie and a potential break-out of the recent range. AUD/USD has immediate resistance at 0.7860. Immediate support lies at 0.7820. Likely range today (before the data) is 0.7820/0.7860. Look to sell rallies, ideally above 0.79 cents.
GBP/USD – settled higher after 4 straight days of trading lower. Sterling closed at 1.3200 (1.3178 yesterday). GBP/USD has immediate resistance at 1.3230 and 1.3260. UK Retail Sales data is due out later on today. Another potentially volatile trading day for the Pound. Likely range 1.3160-1.3210. Look to sell rallies.
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