Opening Comment

OPENING COMMENT

For the most part, price action has been relatively subdued in Asia with the Yen standing out as the only currency with some real volatility. Usd/Jpy dropped sharply to a daily low by 89.30 on reported selling from various Japanese and US names lo inked a USD42B bond redemption due on November 15. But the pair soon recovered back towards opening levels after failing to clear stops below 89.20. However, with the exception of the Yen, the USD has been mildly bid across the board, with many sourcing the relative strength to some ramped up comments from Treasury Secretary Geithner on the Greenback. Geithner has become a little more aggressive with his line on the USD after now saying that he “believes deeply” that the US will keep a strong Dollar. This is somewhat significant with the Treasury Secretary changing the more mainstream USD supportive government rhetoric that has done little to prop the USD over the past several years. Also seen out in support of the USD has been the World Bank’s Zoellick who says that the USD reserve currency status is secure for some time.

Elsewhere, Aussie was initially been bid just shy of the recent 2009 highs on the back of the reaction to the solid industrial output data out from China, but a more concerning loan growth reading and a decline in the Australian Westpac-MI consumer confidence print put the offer back in the Aussie with the market pulling back in the USDs favor. Kiwi was also initially bid up on similar themes, but got whacked even harder, with the added weakness coming from the RBNZ Governor who said that the local currency was overvalued.

It is also worth noting that the early Asia USD weakness resulted in a fresh 2009 low for the USD Index which traded down to 74.90 ahead of the latest bounce. However, with the buck since recovering, this now sets up the potential for a compelling bullish outside day should the market now be able to press higher and take out Tuesday’s high by 75.25.

Looking ahead, it is UK data that takes center stage in European trade with the release of a batch of employment data at 9:30GMT, followed by the much anticipated BOE quarterly inflation report at 10:30GMT. We would then expect things to potentially lighten up into the US given the bond market closure for Veterans Day. US equity markets are however open, with futures pointing to a slightly higher start. Commodities are mixed with oil lower and gold higher.

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel's reports in a more timely fashion, e-mail jskruger@fxcm.com and you will be added to the "distribution" list.