By GCI Forex Research
Fundamental Outlook at 0800 GMT (EDT + 0400)
USD
The dollar weakened across the board.during the Asia session, with the latest bout of weakness brought on by a further round of tightening by the Monetary Authority of Singapore. The euro and the yen made strong gains, and the Australian dollar approached, but did not reach, parity before retreating. EURUSD traded 1.3949-1.4094, USDJPY traded 81.17-81.90, and AUDUSD traded 0.9892-0.9982.
Asia stocks rallied through the session, with the Nikkei 2.1% higher at the time of writing, despite the stronger yen. Richmond Fed President Lacker said inflation is now on target as far as he was concerned. He added that he would probably not support more easing if economic conditions remain as they are. Lacker does not currently have an FOMC vote, and is not due to receive one until 2012.There were no top-tier 1 US economic data releases. However, import prices fell -0.3% (cons: -0.2%) in September after a +0.6% gain in August. Jobless claims due later will likely be the key focus today, ahead of Fed Chairman Bernanke’s speech on Friday entitled “Monetary Policy Objectives in a Low Inflation Environment”.
EUR
ECB Governing Council Member Nowotny said that the ECB’s sovereign bond buying program has been effective in the past when it was needed, and should not be disbanded too soon, as it “makes sense” to use it as a “safety belt”. His remarks come after fellow Governing Council Member Weber yesterday called for the program to be discontinued.
Nowotny also warned that unilateral steps on FX matters could be detrimental to the world economy. At 7.9% (cons. 7.5%, prev. 7.1%) and 1.0%, cons. 0.8%, prev. 0.0%) industrial production for August was released above expectations.
JPY
Finance Minister Noda repeated that Japan is closely watching FX moves. Economics Minister Kaieda said that the stronger yen is driving down sentiment significantly.
GBP
At 5.3k (cons. 5.0k, prev. 2.3k) claimant count in September rose broadly in line with market expectations. Average weekly earnings were released at 1.7% (cons. 1.6%, prev. 1.5%). According to our economist the only notable news is that labour earnings are gradually picking up. Latest data will unlikely have any major impact on the MPC.
BoE MPC member Sentance maintained his hawkish stance, saying that gradual rate increases constituted the right policy and would not endanger a pick-up in the economy.
CHF
In Switzerland, September producer and import prices fell 0.1% m/m (cons. 0.1%m/m) and rose 0.3% y/y (cons. 0.4%, prev. 0.5%). According to our economists lower import prices have been key in driving the headline reading lower. In Sweden, and according to the Swedish Public Employment Service, the unemployment rate rose in September to 8.3% from 8.1% in August.
TECHNICAL OUTLOOK
EURUSD clears 1.4045.
EURUSD BULLISH Recovery through 1.4045 exposes 1.4194 and 1.4371 Fibonacci resistance. Support at 1.3775.
USDJPY BEARISH The pair targets 79.75 with scope for 77.91 next. Resistance holds at 83.03 ahead of 83.99.
GBPUSD BULLISH Move above 1.6018/69 would trigger further gains towards 1.6276. Support at 1.5670 ahead of 1.5503.
USDCHF BEARISH Outlook is bearish; break below 0.9500 exposes 0.9225. Resistance at 0.9729 ahead of 0.9918 breakout low.
AUDUSD BULLISH Pressure on 1.000 psychological resistance; a break here would expose 1.0166. Support at 0.9834 ahead of 0.9709 reaction low.
USDCAD BEARISH Sharp decline targets 0.9931 ahead of 0.9820. Resistance at 1.0106.
EURCHF BULLISH Upside potential held at 1.3494 ahead of 1.3665. Initial support lies at 1.3265 ahead of 1.3072.
EURGBP BULLISH Break of 0.8808 exposes 0.8894 and 0.9039. Support holds at 0.8689 ahead of 0.8563.
EURJPY BULLISH Clearance of 113.26 exposed 110.66 support, but overall outlook is bullish with resistance at 115.68 ahead of 116.68 Fibonacci resistance.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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