ASIA session review: Dollar, euro fall on shutdown

Data released: 

01:45 GMT China HSBC Manufacturing PMI (Sep) 50.2 51.2 50.1 

06:00 GMT Germany Retail Sales (MoM) (Aug) 0.5% 0.8% -0.2% 

06:00 GMT Germany Retail Sales (YoY) (Aug) 0.3% 0.4% 2.9% 

08:30 GMT UK M4 Money Supply (MoM) (Aug) 0.7% 0.7% 0.6% 

08:30 GMT UK M4 Money Supply (YoY) (Aug) 2.1% _ 1.7% 

08:30 GMT UK Mortgage Approvals (Aug) 62.226K 61.350K 60.914K 

08:30 GMT UK Net Lending to Individuals (MoM) £1.6B £1.6B £1.5B 

08:30 GMT UK Consumer Credit (Aug) £0.6B _ £0.6B 

The dollar came under pressure on Monday, along with U.S. equity futures, as a potential U.S. government shutdown loomed, while the euro was separately pressured by the threat of fresh Italian elections. 

In addition, the final reading on a China manufacturing gauge came in well below a preliminary estimate. 

Data released showed the HSBC China Manufacturing Purchasing Managers' Index edged up to a final reading of 50.2 in September from 50.1 in August.The final gauge of nationwide manufacturing activity, however, was lower than HSBC's preliminary September PMI of 51.2 announced Sept. 23. 

These factors were triggering flows towards the Swiss Franc, the Japanese yen and the British pound. 

EURO 

Italian Prime Minister Letta said he will ask for a vote of confidence on Oct. 2. The Italian government has been torn apart by legal troubles facing former leader Silvio Berlusconi, whose criminal tax-fraud conviction subjects him to expulsion proceedings in parliament. Berlusconi allies have said they planned to quit the cabinet. 

EUR/USD gets close to $1.3500 after earlier it fell as low as $1.3480. Strong resistance comes at $1.3570 (Sep 19 highs), extending to $1.3600 (Feb 5 and 6 highs) with the stronger resistance is near yearly high on $1.3712. Below $1.3460 (Sep 25 low)and and 23.6% Fibo of the $1.3100 - $1.3570 rise) support is around $1.3400 (38.2%). 

POUND 

The pound gained versus the dollar before Markit Economics releases a U.K. factory index tomorrow that economists forecast increased to a 2 1/2-year high of 57.5 in September. 

A report today from London-based property researcher Hometrack showed that U.K. house prices rose the most in more than six years this month. 

GBP/USD holds near $1.6140, a bit lower recent high on $1.6180 (initial resistance). Further resistance is around $1.6200 with the key one - at $1.6380 (channel line from Sep 6). Initial support is near $1.6060 (channel line), below - at $1.5890 (Sep 16-18 lows). 

YEN 

The dollar dropped to a one-month low against the yen as political wrangling over the budget threatened a U.S. government shutdown from tomorrow. 

The yen strengthened before Japanese Prime Minister Shinzo Abe is due to outline his plans tomorrow for taxes and an economic-support package. Japan is set to raise its sales tax next year for the first time since 1997, and Abe is expected to introduce a stimulus plan to offset the resulting drag on growth. 

USD/JPY probes strong support at Y97.80 (trend line from Jun 14). Break below widens losses to Y96.80 (Aug 27 lows) and Y95.80 (Aug 8 lows). Minor resistance is near Y99.20 (Thursday’s high), above - at Friday’s highs on Y99.65. Further rise may extend gains to Y100.00 (Sep 13 highs) and Y100.60 (Sep 11 highs). 

DATA AHEAD 

At 12:30 GMT the focus will be at Canada’s Jul Gross Domestic Product, followed by US Sep Chicago Purchasing Managers' Index at 13:45 GMT. 

At 23:30 GMT Australian Sep AiG Performance of Mfg Index is scheduled to release. 

The same time Japan presents Aug Unemployment Rate with Q3 Tankan Large Manufacturing Index comes at 23:50 GMT. 

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