There was little in the way of major market moving data yesterday but markets are looking to take their lead from risk sentiment and Q3 earnings releases. Sentiment had started yesterday on a sour note, as weaker Chinese trade data saw selling in mining stocks which weighed on European indices from the open and European bourses closed lower on the day. The USD found itself under some selling as risk aversion favored JPY, CHF and the Euro to some extent, although the greenback has put in a good recovery thus far this morning having clawed back most of yesterday’s losses overnight. GBP continues to find itself under pressure, and although a weaker USD helped GBPUSD back above 1.2200 yesterday, pressure on the downside remains will selling driving it back below that level in the last few hours. Stocks in the US had been down over 1% at times through yesterday but paired losses into the close to finish the day just marginally lower. That helped sentiment into the overnight, with Asian markets closing moderately higher.
EURUSD has entered an interesting zone, the eventual break of the range below 1.1130 saw a quick depreciation in the pair. As we’ve been highlighting in EURUSD, when a pair remains range bound for a period of time a confirmed break of the range sets a new direction and in EURUSD this was to the downside. Now we find ourselves into an area that has really been the bull/bear zone for EURUSD , below 1.0940 EURUSD has its sights towards 2016 lows just above 1.0800, with record lows towards 1.0500 below, above 1.1060 and we’re back into higher rotation towards 1.1400. With bullish momentum growing in USD, and the ECB quick to come out and “taper their taper comments”, we may well see a larger move lower in EURUSD into the year end. For now 1.0980 acts as support, with 1.0940 below. While 1.1060 provides near term resistance. EURGBP has been fairly mute this week, holding the range between .9000 and .9100, any break either side has only been temporary, quickly reverting to the mean. These ranges therefore remain key levels, with consolidation in between.
Focus this afternoon will be back in the US and while earnings will play their part, the USD will be focused on data releases. Retail sales and consumer confidence data from the University of Michigan will take center stage, with PPI data also due, while Fed Chair Janet Yellen will be speaking at the Boston Fed and markets will be looking for an update from the last Fed meeting, where Wednesdays’ minutes showed a slightly more hawkish stance, albeit nothing the markets hadn’t already deemed from the original statement. The USD is sitting just below its six week highs, and the as usual for us, we need to see continuity amongst Fed members supporting rate hikes, and of course the data to back it up.