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A low-key affair in Asia, BOC – Next in focus

FXStreet (Mumbai) - Risk-sentiment rebounded in yet another quiet Asian session today, with the Asian equities trading firmer led by Japan’s Nikkei. Amongst the G10 currencies, the euro and the Aussie were the top gainers while USD/JPY finally conquered 120 handle.

Key headlines in Asia

Nikkei 225 surges by almost 1% at the open

Key events ahead: focus on BoC and OPEC - Westpac

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

US dollar traded largely subdued against its major competitors in Asia, correcting heavy gains booked yesterday following better than expected US housing starts data. The US housing starts rose 1.21 million in Sept versus an expected rise of 1.14 million. However, the dollar-yen pair shrugged off broad based US dollar weakness and remains bid, finally reaching 120 barrier now, as the yen loses ground on the back of dismal Japanese trade figures. The trade deficit shrank to JPY114.5 billion in Sept against expectations of a trade surplus of around JPY87 billion in the reported month.

The Antipodean currencies trade mixed, as markets continue to digest their respective fundamentals. The Aussie remains well supported on optimistic RBA minutes while awaiting tomorrow’s NAB Quarterly business confidence numbers. While the Kiwi consolidates the sharp losses seen yesterday, after Fonterra’s auction results negatively surprised markets. AUD/USD advances 0.18% to 0.7272. While the Kiwi keeps the red near 0.6750.

Meanwhile the Asian indices ignored negative close on the Wall Street overnight and enjoy solid gains, with the Nikkei lead its Asian counterparts higher. The Japanese benchmark rallies 1.73% to 18,536. Australia’s S&P ASX index erased losses and jumps 0.30% to 5,251. While the Shanghai Composite index gains 0.40% to 3,438. Hong Kong’s Hang Seng bucks the trend and loses -0.37% to 22,989.

Heading into Europe & the North America

There is nothing much to report in the European session ahead as the data-light EUR calendar extends into a third day on Wednesday. Although, the public sector net borrowings data from the UK will be the only data to be published.

Looking ahead, the bank of Canada (BOC) rate decision and the monetary policy statement (MPR) will remain the main highlight in North American session. While the OPEC Summit in Vienna will also be closely monitored.

Analysts at BAML note, “The October meeting includes the release of the MPR, where we see the BoC upgrading 3Q 2015 GDP growth to around 3% from 1.5%. But despite better near-term growth, we don’t expect a notable shift in the tone of the BoC’s policy statement, MPR or press conference, given continued economic headwinds.”

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “Technically speaking the pair continues hovering around last week's close, lacking directional strength, although the risk is turning towards the downside in the short term, as the 1 hour chart shows that the early rally was capped by the 100 SMA, while the technical indicators have retreated from near overbought levels and stand now around their mid-lines.”

“In the 4 hours chart, a brief advance beyond the 20 SMA was quickly reversed, and the indicator maintains a bearish slope, whilst the Momentum indicator has retreated from its mid-line and the RSI hovers around 46, limiting chances of a stronger rally for this Wednesday.”

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