FX traders seem to have poor short-term memories. Yesterday, they were scrambling to buy US dollars. It continued in Asia but European traders didn’t feel the same way, and the greenback was sold across the board.
The minutes created a bit of a stir because of the following “run-on” sentence: “A few participants expected that policy would need to become modestly restrictive for a time and a number judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level in order to reduce the risk of a sustained overshooting of the Committee’s 2 percent inflation objective or the risk posed by significant financial imbalances.” In a nutshell, rates may go higher than expected which is nothing new
Asia equity markets weren’t impressed with the prospect of higher than expected US rates and they closed in the red. The Australian S&P/ASX was the exception because it finished unchanged.
AUDUSD rallied to 0.7146 from 0.7106 after the Australian unemployment rate fell to a 12-year low of 5.0% in September. The forecast was for it to be unchanged at 5.3%. NZDUSD rallied alongside Aussie, buoyed by news that the US did not declare China, a currency manipulator.
USDJPY opened in New York at 112.50, near the bottom of its 112.44-112.71 range. Japan’s trade surplus widened. Prices are supported by 10-year US Treasury yields trading at 2.315%.
EURUSD traded sideways in Asia and rallied in Europe as traders shifted focus from US interest rates to Eurozone developments. Finland’s central bank president predicted the ECB would raise rates in Q4 of 2019
GBPUSD traders shrugged off disappointing September Retail Sales data (Actual 3.0% y/y vs forecast 3.6%) and focused on Brexit news which included the possibility of extending the transition period beyond March 2019. Sterling is trading at the top of its 1.3077-1.3125 range in New York
The Canadian dollar is the laggard of the group. USDCAD drifted higher in a narrow range, in part because of the slide in oil prices. There may also be some USDCAD demand as Canadian banks get set to close their books for another year at the end of the month, although that is just a guess
The intraday USDCAD technicals are bullish while prices are above 1.2950, supported by the break through downtrend resistance at 1.3020 yesterday. A decisive break above resistance in the 1.3050-80 area, sets up a re-test of 1.3170. For today, USDCAD support is at 1.3020 and 1.2980. Resistance is at 1.3050, 1.3080 and 1.3120
Today’s Range 1.2990-1.3060