ASIA session review: Dollar pulls lower after U.S. debt-limit deal

Data released: 

08:00 GMT EMU Current Account s.a (Aug) €17.4B €17.7B €15.5B 

08:00 GMT EMU Current Account n.s.a (Aug) €12.0B €10.0B €26.1B 

08:30 GMT UK Retail Sales (YoY) (Sep) 2.2% 2.1% 2.1% 

08:30 GMT UK Retail Sales (MoM) (Sep) 0.6% 0.4% -0.8% 

08:30 GMT UK Retail Sales ex-Fuel (MoM) (Sep) 0.7% 0.3% -0.8% 

08:30 GMT UK Retail Sales ex-Fuel (YoY) (Sep) 2.8% 2.1% 2.3% 

The dollar eased lower Thursday after booking brief gains the previous day as U.S. lawmakers reached a deal to avoid default, with currency analysts now looking toward another Washington showdown, possible early next year. 

The greenback had risen on news Wednesday that Senate leaders had arrived at an agreement to end the 16-day-long partial government shutdown and restore the government’s ability to borrow funds, pulling back from a U.S. default. 

The deal would finance the federal government until Jan. 15, keeping “sequester” spending levels — something McConnell said was a “top priority” for Republicans. The borrowing limit would be raised until Feb. 7. 

Lawmakers would also be required by Dec. 13 to hammer out a long-term budget plan. Reid said that committee would be led by Sen. Patty Murray, a Washington Democrat, and Rep. Paul Ryan, a Wisconsin Republican. 

EURO 

The euro rallied Thursday. 

Data released showed Eurozone Current Account surplus s.a. widened to €17.4 billion in August from €15.5 billion in July. Analysts expected the surplus to widen slightly more to €17.7 billion. 

Current Account surplus n.s.a. narrowed to €12 billion in August, from €26.1 billion in July and above forecasts of narrowing to €10 billion. 

EUR/USD rallied to above $1.3600, breaking above Oct 8 and 14 highs. Now rate targets at $1.3640 (Oct 3 highs). Back under $1.3600 widens correction to $1.3480 (initial support). Below losses may widen to $1.3400. Initial resistance is around $1.3570 (Tuesday’s high), extending to $1.3600 (Oct 8 and 14 highs). Above resistance comes at $1.3640 (Oct 3 highs). 

POUND 

The pound rallied after the National Statistics informed on Thursday that year-over-year UK Retail Sales grew 2.2% in September, compared with the 2.1% increase in August and slightly above forecasts of +2.1%. On a monthly basis UK Retail Sales climbed 0.6% in September, after dropping 0.8% in August and above expectations of growing 0.4%. 

Annual Retail Sales excluding Fuel increased 2.8%, up from the 2.3% rise and above market consensus of 2.1% growth. Month-over-month Retail Sales excluding Fuel edged up 0.7%, following a 0.8% decrease and exceeding expectations of +0.3%. 

GBP/USD holds at $1.6067, a bit lower the session high on $1.6087 with resistance extends to $1.6020, ahead of $1.6120 (Oct 8 high). Above $1.6260 (Oct 1 high) resistance is around $1.6340 (Jan 2 highs). Support is near $1.6000, below losses may extend to $1.5890 (Oct 16 lows) with a break under widens losses to $1.5820 (Sep 24 lows). 

YEN 

The dollar is under great pressure due mostly to profit-taking. 

The Chinese rating agency Dagong announced on Thursday its decision to lower the US sovereign debt rating by one notch to A-, from A, leaving it on negative outlook. The agency explained in the official statement that the downgrade was motivated by the concerns over the country's ability to deal with the debt crisis and with the damage done to the US economy due to the prolonged government shutdown. 

USD/JPY challenged Y99.00 (initial resistance) and retreated to Y97.80. Initial support comes at Y97.50 (61.8% Fibo of the rally from Oct 7). Below correction may widen to Y96.50 (Oct 7 lows). Above Y99.00 resistance is placed at Y99.40 (channel line from May 22). 

DATA AHEAD: 

At 12:30 GMT invertors will monitor Aug figures on foreign portfolio investment in Canadian securities and Canadian portfolio investment in foreign securities. 

The same time US report Sep Building Permits and Housing Starts along with Initial Jobless Claims. 

At 14:00 GMT Sep Philadelphia Fed Manufacturing Survey is due to come, followed by EIA Crude Oil Stocks change (Oct 11 week) at 15:00 GMT. 

At 16:45 GMT Fed's Evans and Fed's George speak with Fed Minneapolis's Narayana Kocherlakota speaks at 18:45 GMT.

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