A very light data calendar from Europe coupled with the Columbus Day holiday in the US means it is likely we’re in for another day where FX markets drift around in tandem with broader indicators of risk appetite, namely equity indices and commodity prices. Asian equity markets have been mixed since the open with the Hang Seng and Shanghai Composite struggling (Nikkei closed for Japan holiday), but commodity markets have remained supported with gold consolidating just below $1050, silver still elevated at $17.75, and oil holding above $72. The US earnings calendar is very sparse today, with the main US financial names due from Wednesday, however the first few releases from Europe are kicking off this morning, and we expect most to follow the positive start set last week. The few data releases of note this morning have been Swedish Unemployment data and German Wholesale Price Index (Sep); the latter was sharply lower than forecasts at -0.2% MoM (vs. 0.3% expected); affirming the ECB’s view that for now, inflations risks are not a concern. The Swedish unemployment figures showed a slight improvement for Sep (5.3% vs. 5.4% expected), echoing the recent NOK, CAD and AUD labour data that have also shown an encouraging and unexpected improvement in the labour market. The remainder of the week is packed with high-profile risk events including FOMC Minutes, US Retail Sales and Industrial Production, Eurozone CPI, UK CPI and Retail Sales amongst others. With short-USD positions performing so well last week it is unsurprising that we are seeing some profit-taking ahead of the big risk events; the DXY has bounced well off its lows last week, currently trading at 76.60. One of the biggest movers in the majors has been NZDUSD, down a percent at 0.7265 as the USD resurgence reclaims ground and investors pare back risk ahead of tonight’s NZ Retail Sales figures. Consensus estimates are for a 0.5% gain in Aug, but considering its major peers including Australia (0.9% vs. 0.5% exp.), US (2.7% vs. 1.9% exp.) and Eurozone (-0.2% vs. -0.5% exp.) have all convincingly beaten estimates in August, the risks appear to be tilted to the upside in our view.
Today's Key Issues (time in GMT):
08:00 SEK Swedish: AMV unemployment rate, % Sep exp: 5.4 prev: 5.4
21:45 NZD NZ: Retail Sales, % m/m Aug exp: 0.5 prev: -0.5
23:01 GBP UK: RICS housing market survey, price balance Sep exp: 15.0 prev: 10.7
23:01 GBP UK: BRC retail sales monitor, total sales, % y/y Sep prev: 2.2
The Risk Today:
EurUsd The uptrend remains intact despite the USD rally in the past 2 days, and remains constructive on the monthly chart; first ressitance is likely to be around 1.4818 (post-ECB press conference highs) and thereafter 1.4845 and the major resistance at 1.4876. The 10 month uptrend comes in at around 1.4570 so expect any weakness to be met by fresh demand at those levels. Support before that around 1.4680 and 1.4615.
GbpUsd GBPUSD has continued to sell-off since failing last week to overcome resistance between 1.6100/30. This morning we sold off through Friday's 1.5815 lows and stops in EURGBP pushed GBPUSD further below 1.5771 support (Sep 28 lows) before bouncing off support around 1.5724 (low so far 1.5729). There will be good selling interest between 1.5800/1.5815 which should cap any rallies, with the next downside target coming it at the 200dma 1.5475. Bear in mind 14-day RSI is edging towards oversold territory at 33, but still see some room for downside before then.
UsdJpy USDJPY surged through 89.40/50 resistance that had capped the pair so well and is now testing the pivotal 90.40 level (Sep 30 high). A break above here would target the strong resistance at 91.65, with likely support at 90.00.
UsdChf USDCHF remains buoyant but has been met with good supply repeatedly around 1.0350-65. We still look to buy on dips from1.0280-90, targetting a revisit of 1.0400. On the downside, a breach of the 1.0235 support would open us up to a revisit to the low at 1.0186.
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|