Risk currencies remain under pressure in Asia

The main theme in the FX space was an unravelling of the risk trade, with risk currencies losing ground across the board. 

Source: Bloomberg

EUR/USD is looking increasingly vulnerable and remains stuck below a downtrend resistance line, which has been in place since July 14. The single currency was kept under pressure by a benign CPI reading and continuing geopolitical tension. Additionally on the USD side of the equation, a strong employment cost index reading and another strong unemployment claims reading kept USD optimism alive heading into the non-farm payrolls print.

A strong jobs reading later today could just be the trigger for another round of EUR/USD selling. The downtrend comes in at around 1.3400 and that is where we could see fresh shorts come into the frame. Economists are expecting 230,000 jobs (range 310,000 to 160,000). Keep an eye on the US unemployment number which is expected to remain steady at 6.1% and average hourly earnings though, as earnings tend to be a good feed for inflation. On the European economic calendar, manufacturing PMIs will be in focus and a disappointment there could add to the selling.

AUD reacts to China PMI

After having lost its grip on the 0.9300 handle on the back of USD strength, AUD/USD has managed to recover some ground in Asia today. A better-than-expected China manufacturing PMI reading aided a minor bounce for the AUD, but this hasn’t lasted long at all.

Risk sentiment has remained subdued and this is clearly weighing on the local currency. Additionally, PPI data also came in below expectations. I continue to prefer selling a recovery into previous support at 0.932 in the near term. The next notable support is all the way down in the 0.9200 region, where the 200-day moving average comes in.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.