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Aussie Dollar Gains as Risk Appetite Recovers in Currency Markets

Aussie Dollar Gains as Risk Appetite Recovers in Currency Markets

Ilya Spivak,

Talking Points:

  • Aussie Dollar Outperforms as Risk Appetite Recovers Across FX Markets
  • Rumors Hint China May Extend Reserve Requirements to Offshore Deposits
  • Gauge Trends and Spot Reversals in Leading Currencies with DailyFX SSI

Currency and equity markets carved out divergent paths in overnight trade. Asian bourses traded broadly lower, seemingly taking their cues from Friday’s blood-letting on Wall Street. FX looked ahead however, with the majors seemingly taking their cues from US stock index futures and reflecting a “risk-on” tone. The sentiment-linked Australian Dollar is outperformed while funding currencies including the Swiss Franc, Euro and Yen faced selling pressure.

News-flow out of China seemingly helped lift investors’ spirits. The daily Yuan fix brought the largest daily appreciation in a month, helping to calm jittery traders that have come to associate devaluation with risk aversion in recent weeks. A story about the introduction of reserve requirements on offshore Yuan deposits as soon as next week also made the rounds. An official announcement is absent so far. If true, the move may raise overnight lending rates. This would presumably discourage traders from betting on Yuan weakness by making it more expensive to do so.

The economic calendar is relatively quiet over the coming 24 hours. US markets will be closed for the Martin Luther King Jr. Day holiday. On balance, this could offer a fertile environment for further corrective recovery on the risk appetite front as investors prepare for the week’s first bit of high-profile event risk: China’s fourth-quarter GDP data.

Losing Money Trading Forex? This Might Be Why.

Asia Session

GMTCCYEVENTACTEXPPREV
23:30AUDTD Securities Inflation (MoM) (DEC)0.2%-0.1%
23:30AUDTD Securities Inflation (YoY) (DEC)2.0%-1.8%
00:01GBPRightmove House Prices (MoM) (JAN)0.5%--1.1%
00:01GBPRightmove House Prices (YoY) (JAN)6.5%-7.4%
00:30AUDNew Motor Vehicle Sales (MoM) (DEC)-0.5%-1.3%
00:30AUDNew Motor Vehicle Sales (YoY) (DEC)2.2%-6.0%
00:30JPYBOJ’s Kuroda Speaks at Branch Manager Meeting ---
01:30CNYChina December Property Prices ---
02:00NZDNon-Resident Bond Holdings (DEC)67.4%-67.9%
04:30JPYIndustrial Production (MoM) (NOV F) -0.9%--1.0%
04:30JPYIndustrial Production (YoY) (NOV F) 1.7%-1.6%
04:30JPYCapacity Utilization (MoM) (NOV)-0.1%-1.3%
04:30JPYTertiary Industry Index (MoM) (NOV)-0.8%-0.7%0.7%
05:30JPYNationwide Dept Sales (YoY) (DEC)0.1%--2.7%
05:30JPYTokyo Dept Store Sales (YoY) (DEC)2.2%-0.2%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
08:00CHFTotal Sight Deposits (JAN 15)471.3B (A)469.5BLow
08:00CHFDomestic Sight Deposits (JAN 15)403.8B (A)404.0BLow

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.06591.07891.08521.09191.09821.10491.1179
GBP/USD1.39611.41371.41971.43131.43731.44891.4665

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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