- North Korean shelling reverberates throughout US session
- Irish opposition asks government to move up budget vote; government declines
- US Q3 GDP rises to 2.5 %from 2.0% first estimate
- Merkel euro facing exceptionally serious situation
- France’s Lagarde says Ireland must raise taxes to cut deficit
- Dutch Fin Min: Let Irish bank shareholders and bondholders “bleed” ; no reason to eject Ireland from euro, would cause contagion. (some vote of confidence…)
- US existing home sales fall 2.2% in October
- Richmond Fed index rises to 9 in November from 5 in October
- Fed discussed alternative strategies to QE in unscheduled October meeting; significant debate on QE before adopted
- S&P 500 falls 1.4%; US 10-year notes fall 2.4 bp, end well above lowest yields
EUR/USD opened on its highs in the US (1.3555) and fell throughout the session, ending only a handful of pips above the lows of the day at 1.3361. Geopolitcal jitters from North Korea’s shelling of South Korea which killed civilians dominated the early part of the session while Irish sovereign debt woes and uncertainty over the viability of the present government weighed heavily throughout the day.
Major support between 1.3445 and 60 was obliterated as stop-loss selling cascaded late in the European session, eventually pushing EUR below the 50% retracement of the 1.2588/1.4283 rally at 1.3435. Rounds of heavy EUR/USD buying by Asian and Middle Eastern central banks as well as buying by European corporates slowed the decline but was unable to stop it.
The main sellers during the US afternoon were US asset managers, apparently pulling money out of Europe to bring it back home. They knocked the euro as low as 1.3361. Sellers are seen now on rallies to the 1.3440/60 area while bids are expected toward the 1.3335 level, a top for the EUR back in August. The 200-day average at 1.3291 is a further support.
USD/JPY gave ground during the US session with the tempo of selling accelerating as 83.30 support was breached. We fell as low as 82.80 where Chinese bids were rumored. We bounced back in the afternoon to trade back up to the 83.20 area on short-covering. Heavy offers lie at 83.25/35 now.
USD/CHF was constrained by safe-haven buying of Swiss today as a shield from geopolitical turmoil. Gold performed well today despite dollar strength on the same catalyst. USD/CHF barriers remain at 1.00. We close at 0.9975.
AUD/USD fell through the neckline of a head and shoulders topping pattern on the daily charts with the neckline at 0.9744. We slid as low as 0.9710 before stabilizing. A retest of the trendline followed by further weakness would be the perfect bearish scenario if it plays out. With Asian currencies weakening on the Korean conflict, traders feel reserve diversification may be less of a near-term AUD/USD support.
Cable was blasted today as GBP/JPY was very heavily sold. Uptrend support on the daily charts at 1.5923 was lost today as was support in the 1.5840/50 region. Those levels are now resistance on rebounds from 1.5957 lows. 1.5650 is near-term support. We close at 1.5775.
EUR/JPY fell to 110.75 late in Europe, triggering a double top pattern in the process. We close at 111.15. Kampo was a rumored heavy buyer of the cross at 111.00/05.
