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Aussie at strongest levels since Aug, UK Trade balance, Fed speaks eyed

FXStreet (Mumbai) - Friday’s Asian session was relatively calmer as dust settles over the Fed minutes while the macro calendar remained data-quiet. Risk-on dominated markets with the Antipodeans benefiting the most and sitting at multi-week peaks. While USD/JPY traded listless and hovered just below 120 handle, consolidating within the triangle pattern.

Key headlines in Asia

FOMC minutes consistent with recent messages - Goldman Sachs

RBA's AUD model consistent with in-house 67c on 6-month view - Goldman Sachs

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

The demand for higher yielding/ riskier assets was on the rise in Asia as the mixed Fed minutes turned out to be good news for the markets while the overnight rally in the commodity prices, especially oil, restored investors’ confidence.

As a result, the Antipodeans held onto their recent strong bullish run, with the Aussie emerging the top gainer, hitting the highest levels since August 23 at 0.7283, up 0.28% so far. Moreover, downbeat Aus home loans data was completely ignored by markets. While the Kiwi was seen consolidating the previous rally below 0.67 handle. The NZD/USD pair trades +0.16% at 0.6677, having recorded fresh seven-week highs at 0.6703 on Wednesday in reaction to the Fed minutes.

Meanwhile, markets continue to digest the Fed minutes which turned out to be mixed, with the members remaining concerned about the US economic growth and external developments, but at the same time maintained the prospects for the rate-hike this year. The dollar-yen pair trades around a flat-line in narrow range just below 120 handle amid improving risk-sentiment.

Among Asian indices, Japan’s Nikkei leaps 1.42% at 18,405. Australia’s S&P ASX index also extends the rally to 5,274, up 1.23%. While the Chinese markets is also seen advancing 0.70% to 3,165. Hong Kong’s Hang Seng follows suit and corrects higher to 22,720, gaining 1.63%.

Heading into Europe - centered on EUR, GBP

A data-thin European session ahead, with the UK trade balance data and construction output to keep the EUR, GBP traders busy.

The ONS will publish the UK trade figures for the month of August. The trade deficit expanded to GBP 3.4 billion in July as exports hit a five-year low. In August, markets expect the deficit to have shrunk slightly to GBP 2 billion

In August, the UK construction output is expected to show that the performance in this sector has rebounded to 1% against a sharp deceleration seen in July, falling to a 26-month low of 1% m/m basis.

Looking towards the North American session, Canadian employment report will be closely eyed besides, the US import prices data. Fed officials’ Lockhart and Evans are scheduled to deliver speeches at their respective events.

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “The 1 hour chart shows that the technical indicators turned lower in positive territory, whilst the 20 SMA offers an immediate support in the 1.1260 region. In the 4 hours chart, the technical indicators are also turning south above their mid-lines, whilst the price is now well above its moving averages, that anyway lack directional strength. As long as the price holds above the 1.1250 level, the downside seems limited, yet a break below it should be pretty discouraging for bulls, and anticipate some further intraday declines for this Friday.”

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