Talking Points:

  • Yen gains, commodity FX pressured amid risk aversion in Asian trade
  • Risk-off mood seems to be fueled by swelling Fed rate hike speculation
  • US Dollar may rise if Fed’s Brainard echoes colleagues’ hawkish tone

The Japanese Yen outperformed as Asian stocks followed Wall Street lower at the start of the trading week, boosting demand for the anti-risk currency. The sentiment-sensitive Australian, Canadian and New Zealand Dollars faced selling pressure, although the magnitude of overnight moves was relatively restrained.

The risk-off mood seems to reflect firming Fed rate hike bets as a steady stream of hawkish comments from central bank officials paints an increasing sense of consensus on the rate-setting FOMC committee. The spotlight now turns to a hastily-scheduled speech from Governor Lael Brainard, arguably the most dovish of the current crop of voting policymakers.

Brainard will offer the last bit of commentary ahead of the week-long blackout period when Fed officials stay mum ahead an FOMC policy announcement. This offers her an opportunity to set the tone for speculation in the near term. If she echoes the tone adopted by her colleagues in recent weeks, an up-shift in the projected rate hike path is may boost the US Dollar and undermine sentiment trends further.

Losing money trading in the FX market? This may be why.

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Machine Orders (MoM) (JUL)

4.9%

-2.9%

8.3%

23:50

JPY

Machine Orders (YoY) (JUL)

5.2%

0.3%

-0.9%

23:50

JPY

PPI (MoM) (AUG)

-0.3%

-0.1%

0.0%

23:50

JPY

PPI (YoY) (AUG)

-3.6%

-3.4%

-3.9%

1:30

AUD

Credit Card Purchases (JUL)

A$23.6b

-

A$25.5b

1:30

AUD

Credit Card Balances (JUL)

A$51.3b

-

A$52.2b

6:00

JPY

Machine Tool Orders (YoY) (AUG P)

-

-19.7%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

8:00

EUR

Italy Unemployment Rate Quarterly (2Q)

11.5%

11.6%

Low

8:00

CHF

Total Sight Deposits

-

515.8b

Low

8:00

CHF

Domestic Sight Deposits

-

438.7b

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1067

1.1153

1.1193

1.1239

1.1279

1.1325

1.1411

GBP/USD

1.3089

1.3185

1.3226

1.3281

1.3322

1.3377

1.3473

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

To receive Ilya's analysis directly via email, please SIGN UP HERE

Contact and follow Ilya on Twitter: @IlyaSpivak