ASIA session review: Dollar index down as Washington remains deadlocked

Data released: 

05:00 GMT Japan Leading Economic Index (Aug) Preliminar 106.5 106.9 107.9 

05:00 GMT Japan Coincident Index (Aug) Preliminar 107.6 107.6 107.7 

07:00 GMT Switzerland Foreign Currency Reserves (Sep) 432.4B 432.0B 434.2B 

08:30 GMT EMU Sentix Investor Confidence (Oct) 6.1 8.0 6.5 

The ICE dollar index fell Monday, following up on a weekly loss as a stalemate in Washington kept the government shut as a deadline to raise the debt ceiling drew closer. Last week, the dollar index shed 0.2%, its fourth consecutive weekly decline. 

Treasury Secretary Jack Lew on Sunday told CNN that Congress "is playing with fire if they don't extend the debt limit," as the U.S. on Oct. 17 will run out of its ability to borrow. 

Meanwhile, House Speaker John Boehner told ABC there aren't enough votes in the House of Representative to fund the government without defunding or delaying the Affordable Care Act. 

EURO 

Generally the euro tries to recover. 

Data released showed EU October Sentix Investor Confidence down to 6.1 vs 6.5 in September. 

EUR/USD sits on a channel line from Sep 6 at $1.3550, retreating from Thursday’s high on $1.3645/50. Below $1.3460 (Sep 25 low) support is around $1.3400. Above recent highs resistance is near yearly high on $1.3712. 

POUND 

The sterling is posting meager gains at the beginning of the week. 

The big event for the pound ahead in the week will be the BoE minutes due on Wednesday. Market consensus expects a unanimous vote favouring the current status quo, which would be indicative that the central bank is moving further away from its easing cycle, giving support to the sterling. 

The pound rose the most in a week against the dollar before the Bank of England meets this week. It will keep its benchmark rate at a record-low 0.5% and its asset-purchase target at 375 billion pounds ($601.5 billion) on Oct. 10. 

GBP/USD recovered from Friday’s lows on $1.6020, but in general remains under pressure. Now support comes at $1.6000 (Sep 26 lows) with a break under widens losses to $1.5950 (Sep 24 lows). Initial resistance is near $1.6070 (23.6% Fibo of the $1.6250 - $1.6020 decline), then - at $1.6140 (50%). Above $1.6260 (Oct 1 high) resistance is around $1.6340 (Jan 2 highs). 

YEN 

The yen climbed against all of its major peers after U.S. Treasury Secretary Jacob J. Lew’s comments. 

“If the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default,” Lew said yesterday. 

USD/JPY holds a bit below Y97.00. Closest support comes a Y96.80 (Aug 17 lows and channel line from Sep 20) and Y95.80 (Aug 8 lows). Above Y97.00 resistance comes at Y97.70 (earlier broken support line from Jun 13), then - at Y98.70 (Tuesday’s high). 

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