Risk currencies seem to be in a good position at the moment, with most Fed members continuing to sound a dovish tone. Charles Evans spoke again and maintained his usual dovish stance, saying the benefits of QE far outweigh the costs. Meanwhile Yellen defended QE in letters to the Senate. At the same time the developments on the China front are certainly helping risk along, particularly for the high beta currencies. AUD/USD regained its footing in Asia yesterday on the back of the RBA minutes and its gains accelerated above 0.94 on the back of news that the PBoC will exit from normal foreign exchange intervention. This will essentially see the PBoC widen the yuan trading band.
The Third Plenum seems to be a game changer for China and the measures pave the way to significant growth potential with more sustainable economic growth. I would expect the AUD to remain underpinned in the near term. RBA Assistant Governor Debelle speaks at 11.30 AEDT and his comments might drive some volatility for the pair.
A sharp appreciation in the yen yesterday saw the Nikkei lose ground. However, USD/JPY is back above 100 ahead of the first day of the BoJ meeting. Yen outflows picked up with the risk trade back on and improved interest in the single currency. Ben Bernanke’s speech at 11.00 AEDT will also be key for the USD in today’s session. USD/JPY is currently hanging at around 100.20 with near-term resistance at 100.44, which was last week’s high. I continue to favour buying the dips in the pair.
The precious metal has been relatively sidelined with a mixed tone from Fed members sending conflicting signals to investors. Perhaps Ben Bernanke’s speech at 11.00 AEDT might finally see some movement in gold. A level to look out for in the near term is 1278. The 1278 region is the 61.8% retracement of the recovery from the 1182 low to the 1434 high which took place between July and September.
MYR has its AGM and this might offer a bit more insight about the state of the retail sector, particularly after the RBA said there is mounting evidence that the easy monetary policy is working. Looking at the price action, MYR’s recent rally stalled at $2.96 and a break of this level could lead to a move above $3. To the downside, support is in the $2.75 region where buyers are likely to emerge.