ASIA session review: Dollar recovers

Data released: 

06:45 GMT France Business Climate (Oct) 98 98 97 

08:30 GMT UK Bank of England Minutes 

08:30 GMT UK BBA Mortgage Approvals (Sep) 43.0K 39.4K 38.8K 

The dollar corrects on Wednesday after yesterday’s sell-off as U.S. employment data signaled the Federal Reserve would extend its rate-depressing bond-buying program to 2014. 

Reuters released a poll of primary dealers and 9 of 15 see a taper in March. Interestingly, not a single one believes there will be a taper in 2013. The remainder see a Q1 timeframe with 1 saying June. 

The next NFP report is due on November 8 (delayed from November 1). Already the guesses for what it is going to look like have started: “the shutdown … cost the U.S. 120,000 jobs in October”. 

It raises the question of how the shutdown (which ran October 1 to October 16) is going to impact on economic data for the next few months, not just on the next NFP report. 

EURO 

The euro weakens vs the dollar. 

EUR/USD retreats from yesterday’s high on $1.3790. Resistance extends to $1.3800 and $1.3880 (channel line from Sep 6). Closest support comes at $1.3720/15 (23.6% Fibo of the $1.3470 - $1.3790 rally), then - around $1.3650 (Oct 21 lows) and $1.3540 (channel line). 

POUND 

The sterling is losing the grip on Wednesday ahead of the BoE minutes due later. 

BoE Minutes from the MPC monetary policy meeting held on 8 and 9 October and released today reveal that the Committee voted unanimously in favor of maintaining the interest rate at 0.5% as well as in favor of continuing with the program of asset purchases totaling £375 billion. 

The MPC suggested that in the second half of the year the country would see stronger growth than previously forecast, of about 0.7%, and that the unemployment rate would fall more quickly than anticipated in August. 

GBP/USD had correected around 100-points from yesterday’s high on $1.6255 and remains under pressure. Support comes at $1.6060 (Oct 16 high), then - at $1.5890 (Oct 16 lows) with a break under widens losses to $1.5820 (Sep 24 lows). Above $1.6260 (Oct 1 high) resistance is around $1.6340 (Jan 2 highs). 

YEN 

The yen climbed to the strongest level in two weeks against the dollar as the benchmark rate for funds available in China’s banking system jumped by the most since July, spurring demand for safer assets. 

USD/JPY heads for the lower bound of the triangle pattern on the daily charts, limited today by Y99.25 - Y97.00 (strong resistance and support respectively). Below Y97.00 support comes at Y96.55 (Oct 7 lows) and Y95.80 (Aug 8 lows). Resistance is around recent highs on Y98.40 and then - at Y99.25. 

DATA AHEAD 

At 12:30 GMT USA announces Sep Export/Import Price Index and Aug Housing Price Index at 13:00 GMT.
At 14:30 GMT EIA Crude Oil Stocks change data come for the Oct 18 week.
At 22:45 GMT Sep Trade Balance is due to come.At 14:00 GMT BoC announces its Interest Rate Decision with unchanged expected (currently 1%). 

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