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USD extends post-NFP recovery in Asia, UK Services PMI - key

FXStreet (Mumbai) - A dull start to a busy week ahead, with thin liquidity as most Chinese and Australian traders remain on the side-lines on their respective national holiday. The USD/JPY pair regained 120 handle on its recovery from NFP-induced slump while the Antipodeans remain on the bids digesting the latest OZ fundamentals.

Key headlines in Asia

World Bank downgrades East-Asia growth forecasts

Key events for week ahead - Rabobank

NZ Treasury: Growth expected around 0.6% QoQ in H2

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

A low-key affair in Asia, with rising demand for higher-yielding currencies evidenced across the board. The US dollar extends its recovery mode against its major competitors, after the heavy losses booked on the disappointing non-farm payrolls release on Friday. The USD index, the virtual gauge of the greenback’s relative strength, now trades -0.11% at 95.94, recovering from 95.30 – NFP lows.

The Japanese yen gave away gains and fell into the red zone as the USD bulls jumped back into the bids and regained 120 barrier and beyond. The USD/JPY pair remains supported near 119.90 region and now tests highs at 120.10 levels.

The OZ currencies remained firmly bid with the Kiwi emerging the biggest gainer in Asia as NZD bulls ignored the NZ Treasury’s subdued outlook on the economy. The Aussie enjoys solid gains on better than expected Australian job ads data. The job ads rose sharply by 3.9% in Sept versus a 1.3% rise in August, climbing at the fastest pace in 15 months.

Meanwhile, the NZD/USD pair now trades 0.38% higher near fresh five-week highs of 0.6473 levels while the Aussie jumps 0.30% to 0.7070.

On the equities space, Asian markets continue to ride higher; cheering revised Fed hike bets after the NFP figures cast doubts on the US economic prospects. Japan’s Nikkei rallies 1.90% to 18,062. Australia’s S&P ASX index storms higher to 5,150, up 1.92% towards closing hours. While the Chinese markets remain closed in observance of a National Holiday.

Heading into Europe - centered on EUR, GBP

Monday sees the release of a flurry of final services PMI reports from the Euro area economics with the main highlight likely to be the UK one.

The euro zone preliminary services PMI in September came in at 54.0 and the same result is expected in the final reading. The flash PMI for Germany's services sector activity recorded 54.3, with the indicator expected to hold in the final result.

The UK services PMI is seen heading slightly higher to 56.0 from 55.6 recorded in August.

Looking towards the North American session, final services PMI and ISM non-manufacturing PMI reports from the US will be on the cards while the labor market conditions index will be also closely eyed.

China: Actively selling official reserves, once again – TDS

James Rossiter, Senior Global Strategist at TD Securities, notes that there was less laser focus on China through September and the direct market turbulence died down and attention shifted to the Fed, but with the tight trading of onshore-offshore yuan, there is an expectation that China was once again actively selling reserves to manage the currency.
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USD: Dollar bulls on the back foot – BBH

Research Team at BBH, note that the unexpectedly poor September US jobs data weakened the greenback's technical tone, as questions about the underlying strength of the world's largest economy, and the implications for the Fed's take-off, intensified.
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