ASIA session review: Dollar holds tight before data release

Data released: 

08:00 GMT Germany IFO - Business Climate (Sep) 107.7 108.2 107.6 

08:00 GMT Germany IFO - Current Assessment (Sep) 111.4 112.5 112.0 

08:00 GMT Germany IFO - Expectations (Sep) 104.2 104.0 103.3 

08:30 GMT UK BBA Mortgage Approvals (Aug) 38.2K 38.6K 37.4K 

The dollar remained lower after a two-day slide versus the yen as the U.S. government moves closer to a shutdown with lawmakers wrangling over the debt limit and markets gauging the path for monetary policy. 

The U.S. Senate yesterday began considering a measure the House passed Sept. 20 that cuts off money for President Barack Obama’s health-care law and finances the federal government through mid-December. Democratic leaders in the Senate said they won’t pass a bill that takes money away from the 2010 legislation. 

With government funding set to expire Oct. 1 and the Treasury expected to exhaust its ability to borrow funds in mid-October, U.S. federal offices have begun planning for the possibility of a shutdown. 

Federal Reserve Bank of Kansas City President Esther George will speak today, after New York Fed President William C. Dudley said yesterday the U.S. economy still needs support. 

The dollar has fallen 2% against the euro this month and is set for a 3.7% quarterly drop, the most since the period through March 2011. 

EURO 

The euro remained lower after its biggest one-day drop in two weeks ahead of a speech in Vienna by European Central Bank Governing Council member Ewald Nowotny. 

President Mario Draghi said yesterday he’s ready to deploy another long-term refinancing operation to provide funds to Europe’s banking system if needed. 

The euro surrendered initial gains after the German IFO series disappointed investors in September. 

The Business Climate component came in at 107.7 vs. expectations at 108.2 and Current Assessment followed suit dropping to 111.4. Only the Expectations series surpassed estimates and previous reading at 104.2. 

There are no more releases in the euro docket today, while market participants would now shift their attention to US Consumer Confidence and housing data due later. 

EUR/USD consolidates near $1.3500, below post FOMC highs on $1.3570. Strong resistance comes at $1.3600 (Feb 5 and 6 highs) with the stronger resistance is near yearly high on $1.3712. Initial support comes at $1.3450 (channel line from Sep 6). Below support is around Sep 13 lows on $1.3250. 

POUND 

The pound retreated Tuesday after the weak UK data. 

UK BBA Mortgage Approvals rose to 38.2K in August, from 37.4K registered the previous month. The result is below forecasts of 38.6K. 

GBP/USD trades below $1.6020 (also channel line from Sep 6). Below support comes at $1.5780 (Friday’s lows). Initial resistance is around yesterday’s highs on $1.6070, above - at $1.6145 (Sep 18 highs). Above the resistance comes at $1.6290/00 (channel line). 

YEN 

The yen corrects after earlier gain. 

USD/JPY recovered to Y99.00 from session lows on Y98.60. Initial resistance remains at Fridaay’s highs on Y99.65 with a break above targets Y100.00 (Sep 13 highs) and Y100.60 (Sep 11 highs). Minor suppport comes at Y98.60/50 (Asian lows, Sep 16 and 6 lows respectively), then - at Y98.20 (channel line from Aug 8) and Y97.50 (trend line from Jun 13). 

DATA AHEAD: 

At 12:30 GMT Canada will present retail sales data ( 0.6% vs -0.6%). 

US Housing Price Index (MoM) (Aug) is due at 13:00 GMT (0.9% vs 0.7%), ahead of 14:00 GMT US Consumer Confidence ( 79.5 vs 81.5).

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