Asia FX news wrap: Australian employment data trend, and AUD, up

Good morning,

‐ The majors outperformed vs $USD on Wednesday, strongest performing was $GBP with +0.62% spot‐returns, weakest was $CAD with +0.10% returns. ‐US Equities: DJIA 17729.88 (‐0.16%); S&P500 2078.82 (‐0.14%); NASDAQ 5081.838 (‐0.03%).

‐ PBOC weakens its Yuan fixing for an 8th consecutive day, longest run since 2008.

‐ ECB's Coeure says a decision on more QE has not yet been determined. Believes a Fed hike won't directly affect ECB's policy decision.

‐ US oil now working on its sixth straight daily drop. Matches bear run through 3/17 for longest drop in 15 months.

‐ EUR ECB's Constancio sees pockets of assets overvaluation, not widespread. Fed rate‐hike impact on Europe won't be significant.

‐Fed rate‐hike impact on Europe won't be significant.

‐ The big move today in Asia was in the Australian dollar, which ticked slowly and marginally higher in the hours before the employment report for October and then leaped nearly a big figure upon the release. The headline result was a huge beat (58,000 vs. 15,000 expected) and given the volatility in the data raised immediate questions. The trend of employment growth is, though, higher. Regardless of all the doubts and equivocations, as I said the AUD leaped. It stabilized somewhat around 0.7140 and it’s not far from there as I update.

‐ After a disappointingly un‐uber‐dovish speech this morning by Draghi, it appears The ECB needed to full ease‐tard to make sure 'markets' believe. EURUSD tumbled 50 pips ‐ to the lows of the day ‐ after Reuters reports that, in what is becoming increasingly clear desperation, The ECB is mulling buying the debt of cities and regions.

‐ One technical indicator suggests that the dollar has reached its most overbought level in 30 years. The z‐scores of the currencies that comprise the ICE U.S. Dollar Index — the Canadian dollar, yen, British pound, Swiss franc, euro and Australian dollar — have all risen above six simultaneously for the first time since 1985. The index DXY, ‐0.24% is a widely watched measure of the dollar’s strength. (While there was no euro in 1985, the shared currency eventually replaced several European currencies as a constituent of the index). For those who haven’t taken an advanced statistics class, the z‐score allows statisticians to make. According to the analysts at Sundial Capital Research who compiled the report, the dollar’s relative valuation swelled to this level twice during the dollar rally of the early 80s

— once in July 1982, and again in March 1985. When the opposite was true — meaning the dollar was oversold against these same six rivals — short‐term rallies ensued. But this milestone likely doesn’t mean the end of the dollar rally is imminent. The analysts acknowledge that the sample size of the dollar’s rivals is “ridiculously small,” and that the bullish trend didn’t reverse until the second signal arrived. This signal comes as the dollar index is preparing to cross above the 100‐mark for the first time since March — a level that analysts are watching with great anticipation. It was down 0.3% on the day to 98.9940 in recent trading.

‐ In the past trading month (20‐days rolling), Gold has been down 17 days. That's the most bearish I have on record.

‐ It was finally the turn of the capital to see its first senior official ensnared in President Xi Jinping's relentless anti‐corruption crackdown ‐ a day after Shanghai announced that a vice‐mayor was being investigated. The toppling of two senior officials in China's political and economic capitals, on consecutive days, show that Xi's sweeping campaign is not letting up. Yesterday, the Communist Party's discipline watchdog said Lu Xiwen , the deputy party boss of Beijing municipality, was being probed for "severe disciplinary violations", a euphemism for corruption. Lu's downfall means that each of China's 31 provincial‐level administrative areas now has at least one "tiger" — Xi's metaphor for powerful officials — who has fallen from grace.

‐ USOil is just down six days and at moderate support around 42.50, yet retail spec positioning in SSI shows traders 4.5 longs per short…..compare that to Gold ($XAUUSD) which is just off the mid‐point of a decades‐long range and traders are only 2.7 longs per short.

‐ Major news for today: ECB's Draghi Testifies to Lawmakers (08:30 GMT), US Initial Jobless Claims. Have a great day!