Japanese Yen

USDJPY has been the focus of the Asia session as the US dollar is doing what it does best and that strengthens after facing a short period of adversity. Buoyant risk markets and higher US yields make for a convincing argument to push higher, but the recent strong gains in Japanese equities are the most definitive signal to sell JPY

USD/JPY at nine-month high as risk returns

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Euro bears are back in force after EURUSD printed a low of 1.1622 so far. But participation was predictably weak as Asia G-10 dealers were a bit apprehensive to add downside exposure at the bottom of the dip especially ahead of the weekend not to mention critical Eurozone CPI data due at later this afternoon. Likewise, Singapore traders found it equally as difficult to hold any bullish views ahead of the 1.1600 psychological danger zone. Everyone is back in Italy watch mode

Bank of Italy Balance Sheet and latest Monthly Economic note Oct 5

Deadline for Italy to submit the draft budget to EU (Oct 15);

S&P rating review expected for Italy (Oct 26);

Moody’s rating review scheduled for Italy (unknown)

USD in general vs G-10

I think trading the greenback gets incredibly tricky from today through to next Friday NFP as dollar moves will be very much data dependent making it challenging to build a longer terms consensus, in other words, it’s going to be choppy.

Gold Markets

A reality check as spot gold is selling off today as the USD continues to strengthen. For the past three months, gold has traded more like a currency rather than a go-to safe have an asset. With the Euro tumbling overnight, the $1190 trap door gave way as Gold has fallen to $1183 just ahead of the COMEX end of NY break. Besides with the final reading of second-quarter GDP holding at 4.2%Thursday, its reinforced the Fed rate hike outlook for 2019. Gold has been a seller’s market for some time, but with $1190 yielding, bearish activity could intensify with short-term speculators likely to target the August low when the yellow metal hit $1160 before rebounding.

Oil Markets

While still in bullish territory elevated chatter suggesting that Saudi Arabia may quietly add some supply over the next few months has tempered Asian oil bulls today While the likely loss of Iranian supply may be the dominant market theme, OPEC production may be rising.

In this context, speculative flows have categorically focused on Saudi spare capacity or the lack there off and less focus on Saudis contention they will raise output, but I guess the big question is at what price will they deliver? But let’s face it there still a lot of guesswork in play, as there typically is in the boisterous oil markets.

So, in the meantime, dips remain well supported as Iran sanction continues to underpin sentiment but now investors are setting sights on a glitzy $100 per barrel price tag


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