Fundamentals are critical to the benchmarks next move. The most significant cues for what truly matter to the dollar risk trends and stimulus schedules arent due until the end of the week. The US 3Q GDP (due Thursday at 13:30 GMT) and October NFPs (Friday at 13:30 GMT) reports are beacons for FX traders, and there will be considerable hesitation to building into trends (bullish or bearish, risk on or risk off, Taper this site earlier or later) until the data clarifies probabilities for the crowd. Meanwhile, the event risk from this opening session offered a mixed picture. Data (factory orders and New York manufacturing activity) was lower tier, but the Treasurys upgraded quarterly borrowing estimate ($266 billion) reminds us we likely have another debt stand off early near year. More immediate, multiple Fed officials spoke; and it seems they are trying to desensitize the market to a Taper.
No doubt forex investors will be leaning heavily on Fridays forthcoming nonfarm payrolls report to reveal all. Risk of Currency Wars Loom Earlier this morning, Federal Reserve Bank of Dallas President, Richard Fisher, (a hawk, voter in 2014) said in a Sydney speech that the Fed will have to slow quantitative easing at some point adding he doesnt see the Feds balance sheet growth exceeding market estimates. He also said that the fiscal blow-up risk was not part of the Feds September decision not to taper. Employment numbers have been the Feds mantra and this weeks job report will outline policy for the next quarter.
Spanish October Unemployment Change is due out at 08.00 UTC today and is expected to show a rise of 31,300. The European Union Economic Forecast for the next two years is due out at 10.00 UTC along with the Eurozones Producer Price Index m/m for September (expected to rise by 0.3 percent). ISMs US Non-Manufacturing Purchasing Managers Index for October is due out at 15.00 UTC. Analysts expect a slight decline from the prior 54.4 points. The IBD/TIPP Economic Optimism comes out at the same time and is forecast to rise to 41.1 points for this month from the prior 38.4. Todays resistances: 1.3525, 1.3555 and 1.3585.
It hit a seven-week high of 80.930 on Monday. Several U.S. central bankers said on Monday the Fed was in no hurry to taper its bond-buying stimulus. Teppei Ino, analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore, said the euro’s drop should be seen as a corrective move after many traders had piled up long positions. “If you ask whether there will be a shift to a trend of dollar strength and euro weakness, I don’t think that will be the case.” The dollar fell 0.4 percent to 98.23 yen.
Forex – NZD/USD almost unchanged, eyes on N.Z. jobs data
The timing of the euro’s drop against the dollar in Asia seemed to roughly coincide with comments from Federal Reserve Bank of Dallas President Richard Fisher. Speaking at a conference of business economists in Sydney, Fisher said he was concerned that corporate credit spreads have narrowed too much and added that he does not see the Fed’s balance sheet rising to $6 trillion or more. The Australian dollar edged higher, supported by stronger than expected retail sales. Another factor supporting the Aussie dollar was upbeat Chinese data on Sunday showing China’s services sector expanding at its fastest pace in 13 months in October.
FOREX-Euro hovers near six-week low vs dollar on ECB easing bets
The pair was likely to find support at 0.8193, the low of October 30 and resistance at 0.8338, the high of October 25. Comments by Fed officials on Monday indicated that the bank is likely to keep its stimulus program in place for some time to come. Federal Reserve Bank of Boston President Eric Rosengren said bank should keep its asset purchase program in place until there is “compelling evidence of a sustainable recovery making satisfactory progress toward full employment.” The kiwi was higher against the Australian dollar with AUD/NZD edging down 0.19%, to hit 1.1454. Also Tuesday, the Reserve Bank of Australia held its benchmark interest rate at a record-low 2.5%, in line with market expectations. Commenting on the decision, RBA Chairman Glenn Stevens said the Aussie remained “uncomfortably high” and that “a lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy”.