Rumours Of SNB Intervention To Weaken CHF, And Rising Concerns On Strength Of JPY

Market Brief

Final confirmation of the break out in currency ranges came late in the US session yesterday; as EURUSD ensured a daily close through the key 1.5100 technical level, after a quick thrust through final resistance triggered stops all the way up to 1.5140 levels. USDCHF similarly pushed decisively down through 1.0000 to touch lows of 0.9918; and the momentum was powerful enough to force EURCHF to finally breach downside support at 1.5080, touching lows of 1.5012. However despite the break down, the start of the European session today has seen an aggressive move all the way from the lows to 1.5133 highs. Rumours circulate of Swiss banks behind the buying, and it seems to bear the hallmarks of another round of SNB intervention.

Yesterday’s plethora of US data was generally positive; although this month’s Durable Goods Orders markedly missed forecasts with a -0.6% reading (+0.5% expected), the September numbers were revised up sharply from 1.0% to 2.0%. PCE measures were broadly in line or higher than forecast, both initial and continuing jobless claims fell further than estimates, and U.Mich Consumer Confidence came out at 67.4 (higher than the 67.0 forecast). Following the impressive Existing Home Sales on Monday, New Home Sales also smashed estimates at 6.2% MoM, and there were upward revisions to last month’s data. The USD gleaned a little support from the lows, but arguably little about the fundamental backdrop has or will change on better second tier data; and the mild USD rebound during the afternoon could very easily have been frustration at the lack of follow-through on currency moves after technical break-outs.

Overnight, Asian equities have given back a lot of yesterday’s gains, and most currencies have pared back from their highs against the USD. Gold has also retraced from new $1195 highs to $1190 levels, but of all the major asset classes, it seems to be the most likely to threaten another surge higher. The BoJ Minutes focused on deflationary concern; a problem that will be exacerbated by the overnight fall in USDJPY to 86.30 new lows. Officials have hit the newswires in earnest to try and stem the declines; with Finance Minister Fujii saying he is watching FX moves closely, and government spokesman Hirano saying Japan may take ‘appropriate’ action on the rising JPY. Earlier, while USDJPY was trading around 78.20 levels, Deputy Finance Minister Noda had stated “we are not considering intervention right now”, but since then, Senior Vice Minister for the Economy Furukawa has weighed in to add that the government would be concerned if the JPY rose too rapidly.

With sparse data expected this morning (German regional and national CPI readings, Eurozone M3, Norway Unemployment), and the US Thanksgiving holiday likely to affect the afternoon session, we expect FX markets to be largely driven by technical factors and positioning; it is likely stop-hunters will be keen to take advantage of the patchy liquidity as the day goes on.

Currency Tech

AUDUSD
R 2: 0.9406
R 1: 0.9335
CURRENT: 0.9230
S 1: 0.9110
S 2: 0.9060

USDCAD
R 2: 1.0735
R 1: 1.0645
CURRENT: 1.0500
S 1: 1.0450
S 2: 1.0370

EURJPY
R 2: 134.02
R 1: 132.95
CURRENT: 131.00
S 1: 130.40
S 2: 129.00

USDMXN
R 2: 13.265
R 1: 13.120
CURRENT: 12.852
S 1: 12.797
S 2: 12.767

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot