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Risk-off in full swing, Yen strongest in Asia, German CPI – Up next

FXStreet (Mumbai) - A volatile Asian session, despite an empty macro-calendar, as risk-aversion hit Asia and diminished the demand for riskier assets. The safe-havens such as the yen, the Swiss franc, the euro and bonds emerged the biggest beneficiaries of the intensifying risk-off flows.

Key headlines in Asia

Asian stocks tumble, global sell-off extends on China fears

Fed's Williams: Economy can handle start of rate hike process

Dominating themes in Asia - centered on JPY, AUD, NZD

Equity sell-off hit Asia, with Asian stock markets in the deep red following heavy losses on Wall Street and European indices. Markets turned highly risk-averse as Monday’s Chinese industrial profits data re-ignited China slowdown fears, thus sending riskier assets sharply lower across the board. While the uncertainty over the Fed rate hike timing also weighed on the investors’ sentiment.

Although, the ongoing global rout boosted the demand for safe-haven assets as investors flock to safety-asset in times of turmoil and uncertainty. The Japanese yen was the biggest gainer amongst the safe-havens, with USD/JPY losing -0.34% to 119.50, notwithstanding 120 handle. While EUR/USD rises 0.16% to 1.1260, the Swiss franc is gaining 0.18% against the greenback. While gold remains almost unchanged near $ 1131, unresponsive to the risk-off market profile.

Riskier/ higher yielding currencies such as the Antipodeans were heavily sold-off, with the Aussie outperforming its NZ rival. The sell-off across the commodities space also weighed on the resource-linked OZ currencies. The Aussie drops -0.47% to 0.6956 while the NZD/USD pair follows suit, recording a -0.32% loss so far, struggling above 0.63 barrier.

On the equities space, Asian markets extended the global rout, with Japan’s Nikkei emerging the biggest loser, down -3.7% to 16,987. Australia’s S&P ASX index plunges -2.70% to 4,975. While the Chinese indices, the Shanghai Composite tanks -1.84% to 3,043. While Hong Kong markets re-opened in the red after the Mid-Autumn festival holiday and now trades with size-able losses, down -3.57% at 20,431.

Heading into Europe - centered on EUR, GBP

A data-thin EUR calendar extends for the second straight session on Tuesday, with a couple of economic releases from the UK and Germany on the cards.

Germany will release its prelim CPI data for September, with deflation expected to resurface on monthly basis (-0.1% expected after a flat result reported a month ago), while adding 0.1% annually, compared to 0.2% in August.

Looking ahead, the NA session will offer goods trade balance and consumer confidence data from the US while a set of economic data from Canada will also be reported. Besides, the main highlight later tonight is expected to be BOE Governor Carney speech at Lloyds of London, which may spur some volatility and have major influence on the pound.

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “The short term picture for the EUR/USD pair has turned slightly positive, although the pair stalled its intraday advance around a key static resistance level. But the 1 hour chart shows that the price is hovering around its 200 SMA after accelerating above the 100 and 20 SMAs, whilst the Momentum indicator heads slightly higher above the 100 level and the RSI indicator advances slowly around 64.”

“In the 4 hours chart the price advanced above its 20 SMA, now offering an intraday support around 1.1200, whilst the RSI indicator turned north and advanced beyond 50 supporting additional advances towards the 1.1335 region for this Tuesday, on renewed demand beyond the mentioned daily high.”

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