This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Senate is expected to vote through a deal which essentially re-opens and funds the government until January 15, and extends the debt limit until February 7. Negotiations between Senators Reid and McConnell resulted in a deal that would end the shutdown and extend the debt ceiling deadline. At the same time, John Boehner said house US Republicans will not block the deal. Once voted through, the President will then sign off and effectively ensure the can is kicked down the road.
Yen crosses gearing up for some big moves
With a deal done the yen is likely to unwind against the majors. USD/JPY looks likely to test ¥99 in Asia today and is currently hanging around 98.93 in a sign that confidence is returning to the market. The pair has been threatening to move higher since yesterday and we expect this trend to continue in the near term as the deal is concluded. The pair hasn’t traded above 99 since September which was right about the time when this US fiscal crisis ramped up. BoJ Governor Kuroda will be on the wires tomorrow and might provide some hints ahead of the BoJ meeting at the end of the month. Apart from USD/JPY, the AUD/JPY cross has also been a big mover. It’s a pretty interesting setup in AUD/JPY at the moment as the pair pushed through 94 to a high of 94.5, which is its highest level since June. I am actually looking at longs on the pair at the moment as AUD fundamentals continue to improve while Japan’s policies are likely to weigh on the yen. I would be eyeing a move towards 96 in the near term.
AUD holds firm against the USD
AUD/USD is edging closer towards the 0.96 level, where we expect to see some consolidation in the near term. Locally we have NAB quarterly business confidence data due out at 11.30 AEDT. Following the recent improvement in business confidence readings, expectations will be relatively high. Tomorrow will be a real test for the AUD’s durability, with a data dump from China along with Glenn Stevens’ speech. Investors will be hoping to see China data confirm that growth is on track and this will allow the AUD to continue its run in the near term.
Data set to ramp up
Over in the US we have unemployment claims, the Philly Fed manufacturing index and a few Fed members on the wires including Evans, Dudley and George. Focus will swiftly switch to tapering expectations as the government reopens and some key data releases start to hit the wires again. US data comes as an addition to China’s GDP, industrial production, fixed asset investment, retail sales and FDI.