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USD hits fresh 8-month highs in Asia, German data eyed

FXStreet (Mumbai) - Broad based US dollar strength emerged the underlying theme in Asia, kicking-off an action-packed week ahead. The main highlights for the week remain the ECB decision and the last US NFP report before the historical Fed meeting on Dec 16.

Key headlines in Asia

Japan’s retail sales rebound in Oct, IP misses estimates

‘Japan economic fundamentals are strong’ – BOJ’s Kuroda

Negative short-term JGB rates reflect easing – BOJ’s Kuroda

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

A host of economic releases across the Asian-pac regions made up for a busy start to this week. While Bank of Japan’s (BOJ) Governor Haruhiko Kuroda’s speech in Nagoya offered the much-needed respite to JPY bulls. USD/JPY trades -0.06% lower around 122.70 levels, with the Asian traders bidding up the yen on the back of impressive Japan’s retail sales data and optimistic BOJ Kuroda’s comments. The central bank head talked up Japanese economic outlook, citing that the final demand is improving and the fundamentals remain strong.

Japan’s retail sales rebounded to 1.8% y/y in October, after slipping 0.1% in September. Markets expected a 0.9% rise last month. While on monthly basis, retail trades were up 1.1% in October, following a 0.7% increase in Sept.

While the Antipodean traded mixed, with the Aussie hovering below 0.72 handle, unable to benefit from the better than expected rise in the Aus company operating profits data. Moreover, traders remain cautious ahead of macro updates from China and Australia due tomorrow. While the RBA cash rate announcement due tomorrow also keeps the AUD traders unnerved.

On the other hand, the Kiwi trades 0.16% higher at 0.6545 levels, extending recovery beyond 100-DMA located at 0.6534. The bird appears to have found support from the improvement in the NZ business morale as reflected by the ANZ business confidence gauge. The ANZ Business Confidence Index, jumped to 14.5% in Nov from a net 10.5% rise seen previously, hitting the strongest level since May. However, the recovery seems short-lived on the back of rising US dollar, lower commodity prices and persisting sell-off in China stocks.

On the equities space, the Asian indices are extending the weakness for the second-day in a row backed by the ongoing rout in the Chinese indices. The mainland China’s benchmark, the Shanghai Composite drops -1.52% to 3,375 points. Hong Kong’s Hang Seng declines -0.43% to 21,973. Japan’s benchmark, the Nikkei now loses -0.67% to 19,751 while Australia’s S&P ASX index sheds -0.50% to 5,176.

Heading into Europe & the US

A quiet start to the week ahead, with the EUR calendar offering a set of relevant economic news from Germany on cards. While the net lending to individual data will be published from the UK in the session ahead.

Germany will release its preliminary inflation data for November, with CPI growth expected to show a 0.1% advance on a monthly basis, after a flat result reported a month ago, while adding 0.4% annually, compared to 0.3% in October. Also, the German retail sales for October will be reported, with a 0.2% drop expected on a monthly basis, following the flat result in September.

Apart from data, the International Monetary Fund’s Executive Board will meet in Washington to decide whether it will add China’s yuan to its reserve-currency basket (SDR).

In the North American session, the Canadian current account data will be published followed by the Chicago PMI and pending home sales data from the US.

EUR/USD Technicals

Research Team at AceTrader noted, “Despite euro's intra-day decline from 1.0638 to 1.0569 on Friday, subsequent short-covering rebound in New York afternoon suggests further choppy trading above last Wed's fresh 7-monthe trough at 1.0569 would continue before recent downtrend resumes, break of said last week's low would extend weakness to 1.0540/50, loss of momentum should keep price above daily sup at 1.0521 today. On the upside, only above 1.0638/42 res would prolong near term sideways swings and risk stronger retracement to 1.0689 before prospect of another decline.”

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