US dollar recoups some losses despite poor data. BoJ keeps rates on hold as expected. Biggest drop this year seen in oil.

CURRENCY TRADING SUMMARY

  • U.S. Dollar Trading (USD) grinded higher against the majors in the overnight foreign exchange trading session as soft data released gave comfort to the market that the US economy was headed for a soft landing. Headline CPI for the month of October fell to      -0.5% from a -0.3% estimate and core CPI fell to 0.1% from a 0.2% estimate. Capital net flows came in less than the expected level of USD$75bln at USD$65.1bln. Industrial production came in at 0.2% for October from a 0.3% estimate. The only upbeat data release was the Philly Fed survey coming in at 5.1 from a 5.0 estimate. In other markets, the Dow Jones index rose 54pts and the NASDAQ climbed 6pts as the market was buoyed by the prospect of lower inflation pressures coupled with moderate economic growth. Crude oil experienced its biggest one day fall this year, dropping USD$2.45 to USD$56.31 a barrel as technical selling and higher inventories pushed crude prices lower. Looking ahead, housing starts are due out tonight in a relatively data free day.

  • The Euro (EUR) traded within a low of 1.2787 and a high of 1.2839, before closing at 1.2794 in the New York session. On the data front, Eurozone HICP came in at 0.4% from a 0.3% estimate.

  • The Japanese Yen (JPY) traded within a low of 117.78 and a high of 118.33 versus the dollar, before closing at 118.19 in the New York session. On the data front, the BoJ kept rates steady at 0.25% with the BoJ Governor sounding neutral on interest rates. Governor Toshihiko Fukui dampened any possible hike this year after he said he did not know the timing of future rate moves.

  • The Sterling (GBP) traded within a low of 1.8856 and a high of 1.8931, before closing at 1.8880 in the New York session. On the data front, retail sales for October came in at 0.9% beating estimates of 0.3%.

  • The Australian Dollar (AUD) traded within a low of 0.7645 and a high of 0.7696, before closing at 0.7666 in the New York session.  

  • Gold (XAU) weakened by US$2.10 to US$621.70 an ounce as the drop in oil and strength in US dollar hampered any moves to the upside for gold.

TECHNICAL COMMENTARY

FX strategy

  • Euro 1.2790

Initial support at 1.2773 (Nov 15 low) followed by 1.2746 (Nov 8 low). Initial resistance is now located at 1.2901 (Nov 10 high) followed by 1.2941 (Aug 21 reaction high).

  • Yen 118.20

Initial support is located at 117.12 (Nov 13 low) followed by 116.97 (Nov 1 low). Initial resistance is now at 118.61 (Nov 9 corrective high) followed by 119.67 (Oct 24 high).

  • Pound  1.8880

Initial support at 1.8838 (Nov 15 low) followed by 1.877 (61.8% retracement of the 1.8516-1.9182 rally). Initial resistance is now at 1.8972 (Nov 15 high) followed by 1.9052 (Nov 14 high).

  • Australian Dollar  0.7660

Initial support at 0.7642 (Nov 16 low) followed by 0.7614 (Nov 13 corrective low). Initial resistance is now at 0.771 (Nov 9 high & 61.8% ret 0.7769 to 0.7614) followed by 0.7769 (Nov 1 high).

  • Gold  618

Initial support at 615.7 (Nov 15 low) followed by 613.4 (Nov 8 low). Initial resistance is now at 636.9 (Nov 10 high) followed by 640.6 (Sep 6 high).