ASIA session review: Dollar recovers as Syria attack looks less likely

Data released: 

05:30 GMT China Industrial Production (YoY) (Aug) 10.4% 9.9% 9.7% 

05:30 GMT China Retail Sales (YoY) (Aug) 13.4% 13.2% 13.2% 

06:45 GMT France Industrial Output (MoM) (Jul) -0.6% 0.6% -1.4% 

The U.S. dollar moved sideways in Tuesday trading, with the market holding on to expectations for a reduction of Federal Reserve stimulus next week, while the odds of an attack on Syria appeared to decrease. 

Since late August, the dollar has seen sporadic bouts of safe-haven buying amid concerns of a U.S. military strike against Syria that has the potential to spark a wider regional conflict. 

However, a Russian proposal to avert a strike by having the Syrian regime surrender its chemical weapons received welcome from Syria’s foreign minister, with U.S. President Barack Obama calling the idea “a potentially positive development.” 

On the policy front, meanwhile, many economists stuck to the consensus forecast for the Federal Reserve to begin tapering its $85-billion-a-month bond purchases at the central bank’s Sept. 17-18 meeting. 

EURO 

The euro weakens as market participants continues to digest the upbeat data from the Chinese economy. 

Recently Italy reported nation GDP set steasy at -0.3% in 2Q, while on the year-to-year base it contracted 2.1%. 

EUR/USD holds a bit lower Monday’s high on $1.3280, currently at $1.3262. Strong resistance remains at $1.3400 (Aug 23 highs) with a break above targets $1.3450 (Aug 20 high). Initial support comes at $1.3220 (Sep 5 highs) and $1.3100 (Sep 6 lows). Below $1.3100 rate may test $1.3060 (Jul 18 lows) and $1.3000 (Jul 15 lows). 

POUND 

The pound strengthens Tuesday as U.K. house-price gauge rose to the highest in almost seven years in August. 

GBP/USD breaks under $1.5700 after it challenged $1.5730 on Monday (initial resistance). Initial support is near Friday’s lows on $1.5660/50, below - at $1.5600 (channel support line from Aug 30), extending to Aug 30 lows at $1.5460. Above $1.5730 resistance is near $1.5830 (Nov 15 lows). 

YEN 

The yen has declined 1.6% in the past week. 

The yen weakened as minutes of the BOJ’s Aug. 7-8 meeting showed policy board members said the central bank’s bond purchases were putting downward pressure on yields and consumer price expectations have turned favorable. 

USD/JPY challenges Y100.00 with a break above targets Y100.20 (Sep 5 highs), then Y100.80/85 (Jul 2 and 18 highs). Minor support comes at Y99.50 (daily lows), then - at Y99.00/Y98.90 (channel line from Aug 27), ahead of Y98.00/Y97.90 (Aug 30 lows). 

COMMODITY CURRENCIES 

AUSSIE: Australia’s dollar initially rose after the China’s data released, but currently retreats. 

China's Industrial Production (YoY) for the month of August came at 10.4% vs 9.9% exp and 9.7% in July, with Retail Sales (YoY) (Aug) showing a 13.4% vs 13.2% exp and 13.2% prior. 

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