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FOREX: US Dollar Rebounds in Asia, S&P Futures Hint More Gains Ahead

By , Currency Strategist
28 October 2011 07:47 GMT

Talking Points

  • US Dollar, Yen Correct Higher vs. Risk-Linked Currencies in Asian Trade
  • Japanese Industrial Production and Inflation Disappoint, Jobless Rate Falls
  • S&P 500 Futures Hint Stocks-Linked Currencies to Trim Gains into Weekend
  • US Personal Income and Saving, Consumer Confidence Headline Calendar

The US Dollar and Japanese Yen corrected higher against their major counterparts overnight as markets digested aggressive selling of the two safe-haven currencies over the preceding 24 hours. The Australian and New Zealand Dollars bore the brunt of selling, down as much as 0.7 and 0.6 percent against their US namesake, having added 3.2 and 2.7 percent respectively yesterday as an encouraging outcome to the EU debt crisis summit and a supportive US GDP report stoked risk appetite and bid up the sentiment-linked currencies.

Japanese economic data returned mixed results. The Jobless Rate edged downward to 4.1 percent in September, the lowest in nearly three years, but Industrial Production slumped 4 percent and Consumer Price Index figures showed the annual inflation rate unexpectedly printed flat over the same period. The latter outcomes seem to at least in part reflect the impact of a stronger Yen on the export sector and relative price levels. The currency tapped a decade high this month and now trades up 4.5 percent since the beginning of the year.

Looking ahead, S&P 500 stock index futures are pointing lower, down as much as 0.5 percent in Asia, hinting the greenback is likely to extend its rebound amid a deeper downward correction in risk-correlated currencies. The European economic calendar is lackluster, with traders looking ahead to the US data docket. Personal Income and Spending figures are on tap, with expectations calling for both to improve in September (the former yielding the largest increase in four months).

The final revision of October’s University of Michigan Consumer Confidence gauge is also due to cross the wires, with forecasts calling for a slight upgrade from flash estimates. It remains to be seen whether such outcomes are potent enough to meaningfully refuel the rally in risky assets into the weekend or if investors have sufficiently priced in the rosier near-term outlook for US growth after yesterday’s GDP reading, allowing profit-taking to prolong the current correction into the closing bell.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

GfK Consumer Confidence Survey (OCT)

-32

-30

-30

23:30

JPY

Household Spending (YoY) (SEP)

-1.9%

-3.5%

-4.1%

23:30

JPY

Job-To-Applicant Ratio (SEP)

0.67

0.67

0.66

23:30

JPY

Jobless Rate (SEP)

4.1%

4.5%

4.3%

23:30

JPY

Tokyo CPI Ex-Fresh Food (YoY) (OCT)

-0.4%

-0.4%

-0.1%

23:30

JPY

Tokyo CPI Ex Food, Energy YoY

-1.0%

-0.8%

-0.4%

23:30

JPY

Tokyo CPI (YoY) (OCT)

-0.5%

-0.5%

-0.3% (R-)

23:30

JPY

National CPI (YoY) (SEP)

0.0%

0.1%

0.2%

23:30

JPY

National CPI Ex-Fresh Food (YoY) (SEP)

0.2%

0.2%

0.2%

23:30

JPY

National CPI Ex Food, Energy (YoY) (SEP)

-0.4%

-0.4%

-0.5%

23:50

JPY

Industrial Production (MoM) (SEP P)

-4.0%

-2.1%

0.6%

23:50

JPY

Industrial Production (YoY) (SEP P)

-4.0%

-2.3%

0.4%

1:35

CNY

MNI October Business Condition Survey

58.47

-

59.84

4:00

JPY

Vehicle Production (YoY) (SEP)

-4.5%

-

1.8%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

EUR

French Consumer Spending (MoM) (SEP)

0.0%

0.2%

Low

6:45

EUR

French Consumer Spending (YoY) (SEP)

-0.7%

0.3%

Low

8:00

EUR

Italian Hourly Wages (MoM) (SEP)

-

0.0%

Low

8:00

EUR

Italian Hourly Wages (YoY) (SEP)

-

1.7%

Low

9:30

CHF

KOF Swiss Leading Indicator (OCT)

1.04

1.21

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3953

1.4336

GBPUSD

1.5989

1.6176

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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28 October 2011 07:47 GMT