AUD struggles on NAB business confidence

It has been a fairly subdued start to the week for the FX space as the US dollar consolidates after having posted some hefty gains last week.

The most significant move in Asia today is a drop in the AUD after NAB business confidence data disappointed. NAB business confidence normalised after two months of hefty gains, dropping to 5 in October from 12 in September. The September reading was the highest since March 2010. While the reading wasn’t too disappointing, it was enough to give traders an excuse to sell down the AUD further. AUD/USD dropped to a low of 0.934 on the back of the announcement and continues to come under pressure. The next support to look out for will be the bottom of the recent range at 0.93 where we could see the pair find some buyers.

Another issue to look out for in Asia today will be commentary from China’s third plenum. Any commentary on how structural reforms will impact the mix of growth, inflation and the credit cycle going forward will drive price action.

Looking to sell the rallies in euro

EUR/USD enjoyed a minor bounce yesterday with some feeling the recent sell-off on the back of the rate decision was a bit overdone. Perhaps it was also lifted by the confidence vote in Greece which PM Samaras survived. However, I remain of the opinion that any moves back into the 1.345 region will be used as an opportunity to sell the pair. Later today it will be all about price action in the US bond market which re-opens today after being shut for Veterans Day. Over the coming days we get final inflation reads out of Europe, although these aren’t expected to change, while we also get Q3 GDP on Thursday and growth on the quarter is expected to expand at a meagre 0.1%.

USD/JPY underpinned in Asia

USD/JPY looks like it is gearing up for a move higher after the pair closed above the top end of a triangle compression pattern. The pattern has been in place since June and has rapidly closed over the past month. We’ve already seen USD/JPY edge towards 99.50 in Asia and a re-test of 100 is on the cards in the short term. There has been some economic data out of Japan today with a mild disappointment in tertiary industry activity while the M2 money stock was ahead of consensus. We also have Japan consumer confidence and machine tool orders due out later today.

On the USD side of the equation the market will remain pinned on comments from Ben Bernanke over the next couple of days and Janet Yellen at the end of the week.


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