Asia again faded the moves in New York, this time buying the JPY crosses and selling the dollar. Earlier in NY, equities and the JPY crosses sold off after Citigroup was downgraded and concerns about the credit markets dominated the news flow. USD/JPY led the charge higher as it rallied through 114.50 dragging EUR/JPY up off the lows. EUR/USD trickled higher but is finding resistance into the 1.4450 area. AUD/USD, notably weak in NY, was also strong after holding above .9100.
The markets can be quite fickle. On Wednesday, JPY crosses rallied and the dollar made new multi-year lows against some currency pairs but just as fast we’ve seen a reversal today. Coincidentally, commodities also reversed as oil touched an all-time high but traded sharply lower. Further, copper, an input in a vast number of goods and a leading indicator of the global economy, may have put in a triple top around the $380 level. Weakness in commodities currencies like AUD, CAD, and NZD could lead a larger move higher in the dollar and lower in the JPY crosses (since many are popular currencies in the JPY carry trade).
Looking forward, the focus in the markets is on remaining US economic data including the crucial Non-farm Payrolls. Expectations are for an increase in 85k for October vs. an increase in 110k in September. However, pay attention to any revisions in the September number as we have heard some rumors that it may be significantly revised downward.
Upcoming Data Releases (London Session):
- Switzerland: (2:45am ET) Month over month Consumer Price Inflation expected .8% vs. previous .1% (relevance: medium).
- Germany: PMI Manufacturing expected 53.5 vs. previous 54.9 (relevance: medium).
- UK: (5:30am ET) PMI Construction expected 59.5 vs. previous 60.3 (relevance: medium).
