Article by ForexTime

USD/JPY opened in Asia at 108.84 after an inside trading day when all of the action was focused on commodity currencies due to rising China growth concerns. USD/JPY eased to 108.60 in early Asia when the USD broadly weakened due to longs taken last week in the wake of the FOMC paring back. Talk of large Japanese bids round 108.50 despite the Japanese holiday – discouraged attempts lower. USD/JPY moved back to 108.75 when risk appetite improved following better HSBC China flash PMI and encouraged some AUD/JPY buying. The Tokyo holiday ensured a quiet trading session in Asia. Bids from Japanese names around 108.50 underpin while profit taking selling above 109.00 is capping the price action. USD/JPY may consolidate 108.00/110.00 for a while or until a fresh catalyst emerges. USD/JPY will have a hard time breaking above the psychological resistance at 110 due to option barriers at that level and while UST yields remain contained despite the hawkish turn in Fed expectations.

EUR/USD opened the Asian session at 1.2849 after finding support below 1.2820 during the US session despite dovish comments from the Draghi. EUR/USD moved higher in early Asia when the USD was broadly offered in a holiday thinned market. EUR/USD traded to 1.2864 before sellers emerged ahead of 1.2870 as they did on Monday. EUR/USD slipped back to 1.2850 heading into the afternoon session, as improved risk appetite in Asia following the better than expected HSBC flash China PMI led to some paring back of EUR/AUD longs. EUR/USD is in a down-trend, but there might be some consolidation/correction ahead of strong support between 1.2740/90 unless a fresh catalyst emerges. The market is short EUR/USD and the divergent c/bank expectations driving the pair lower is largely built into the price. That catalyst may be sparked by flash EZ MFG PMI later today if they are weak enough to ramp up expectations the ECB has a lot more work to do in reviving the weak EZ economy.

GBP/USD traded a 1.6356-91 range in Asia on Tuesday; last at 1.6387.

USD/CHF traded a 0.9386-0.9403 range in Asia on Tuesday; last at 0.9395.

AUD/USD opened on Tuesday at 0.8872 and traded a moderate 0.8867-0.8913 range in Asia on Tuesday; last at 0.8909. The pair had bottomed out at 0.8851 after the ridiculous Roubini (75 cents) inspired sell-off overnight. AUD/USD traded a 0.8867-83 range prior to the China PMI data – last at 0.8880. AUD/USD rallied on the better than expected headline PMI number of 50.5 but as always the devil was in the detail. New orders were strong but it was the 5-1/2 year low in the employment subset that dampened any enthusiasm for the data. AUD/USD hit 0.8898 before returning to where it came from at 0.8880. Once the dust had settled AUD/USD started to crawl higher again with large option maturities (tonight) at 89 cents pinned by local banks. The maturities are predominantly puts so topside trading might be subdued around 89 cents until the NY settlement. Overall the market is back (rightly or wrongly) in China bear mode thus AUD remains a simple sell on rallies proposition. The Syria/Northern Iraq IS strike failed to register in FX trading. Offshore might have a different view.

Article by ForexTime

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