Daily Report: Commodity Currencies Jump on China GDP, EU Summit Watched

Commodity currencies jump in Asian session as Chinese GDP data lifted risk sentiments and sent Asian equities higher. Nikkei is up over 145 pts while HK HSI is up over 120 pts at the time of writing. AUD/USD extended this week's rebound and is pressing 1.04 level. USD/CAD also reversed earlier loss this week and is back below 0.98. China's Q3 GDP grew 7.4% yoy, slowest rate since 2009 and was the seventh successive quarter of slower growth. But that matched market expectations. Meanwhile, industrial production rose 9.2% yoy in September, well above expectation of 7.7% yoy. Retail sales rose 14.2% yoy versus expectation of 14.0% yoy. Meanwhile, European majors pared gain ahead of EU summit in Brussels.

European leaders will meet today in a summit over the plans for a banking union. It reported that leaders are viewing the banking supervision as a matter of priority and such objective should be completed by the end of the year. Though, ECB Executive Board member Joerg Asmussen said that the central bank might not be able to start banking supervision early next year even if the legal structures are already in place.

In Greece, troika left Athens without a finalized financing deal and that would be discussed "between official lenders and Greece". Concerning Greece’s access of the next tranche of financial assistance, the troika stated that "the authorities and staff teams agreed on most of the core measures needed to restore the momentum of reform and pave the way for the completion of the review". Greek Prime Minister Antonis Samaras said that he’s "confident we're doing everything we have to do in order to get it (a deal) and get it soon, so that we can move towards a recovery".

In Spain, prime minister Mariano Rajoy is still hesitating to request to activate ECB's OMT bond buying program as he reiterated that it will be requested when borrowing costs become unbearable. Though, Spanish yield dipped to the lowest level since April after Moody’s announced to keep Spain’s credit rating at investment grade Moreover, Moody’s expected the Spanish government to "ask for an Enhanced Conditions Credit Line (ECCL) from the ESM (European Stability Mechanism) as a prerequisite for the ECB activating its OMT program in relation to Spanish government debt".

Looking ahead, Swiss trade surplus is expected to widen to CHF 2.42b in September. UK retail sales is expected to grow 2.2% yoy in September. Canadian wholesale sales are expected to rise 0.2% mom in August. From US, initial jobless claim is expected to bounce back to 363k. Philly Fed survey is expected to improve to 0.2 in October. Leading indicators is expected to rise 0.1% in September.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 103.07; (P) 103.40; (R1) 103.90; More

EUR/JPY rose to as high as 103.83 so far today and intraday bias remains on the upside. As noted before, current development argues that rebound from 94.11 is resuming. Break of 103.86 will confirm this bullish case and target 61.8% retracement of 111.43 to 94.11 at 104.81 and then 111.43 key resistance. On the downside, though, below 102.90 minor support will delay the bullish case and turn bias neutral again for more sideway trading.

In the bigger picture, we're favoring the case that whole down trend from 169.96 (3008) has completed at 94.11 already, on bullish convergence condition in weekly MACD. Focus is now on 111.43 key resistance level. Break will confirm this bullish case and bring further medium term rise to 123.31 and above (38.2% retracement of 169.96 to 94.11 at 123.08). And, we'd favor this bullish scenario as long as 97.98 support holds. Though, considering that EUR/JPY can't take out 55 weeks EMA decisively yet, break of 97.98 will favor another low below 94.11 instead.

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