Risk appetite was the name of the game during the Asian session as traders decided to…just stop selling?
Kidding. I have the deets below. See, thanks to today’s themes, there may be an opportunity to trade USD/JPY.
Before we talk about the setup, though, make sure you’ve read what went on in the U.S. and Asian sessions:
- Bank of Canada maintains current policy rate, shifts QE to longer-term bonds
- Canada says pandemic aid has limits as central bank boss warns of long slog to recovery
- Macron declares second national lockdown in France
- Germany announces partial lockdown in November
- Switzerland imposes early closing time for bars and restaurants
- Japan’s retail sales fall for seventh straight month hurt by coronavirus
- ANZ: final October outlook survey confirms “solid” increases in expectations and confidence versus September
- Australia Q3 import prices fall 3.5% on quarter, 5.7% on year
- NAB: quarterly business survey shows improvement in activity, but warns of lags on the labour market
- BOJ cuts growth forecast but flags policy pause on recovery prospects
- BOJ sees more volatile recovery path amid high virus uncertainty
- Oil inches up after 5% slide overnight as hurricane shuts U.S. output
- Asia’s COVID-19 control tempers global stock selloff, U.S. futures jump
- Asian stocks slide on coronavirus surge, yuan rise supports FX
Upcoming Potential Catalysts on the Economic Calendar:
- Germany’s unemployment change at 8:55 am GMT
- U.K.’s mortgage approvals at 9:30 am GMT
- U.K. net individual lending at 9:30 am GMT
- U.S. advance GDP at 12:30 pm GMT
- U.S. initial jobless claims at 12:30 pm GMT
- ECB’s policy statement at 12:45 pm GMT
- U.S. pending home sales at 2:00 pm GMT
What to Watch: USD/JPY
In case you missed it, the safe-haven dollar was king of pips during the U.S. session after traders learned of France and Germany’s plans to implement partial lockdowns. Not good for risk appetite, which was already taking hits ahead of the U.S. elections.The Asian markets were generally happier about their lot. While there were still some selling, the region’s relatively better control of coronavirus infections plus the rebound of the Chinese yuan supported some risk-taking.
Over the next couple of hours, I’ll be keeping close tabs on USD/JPY, which is already a few pips above the 104.25 level that had held as support in late July and in mid-September.
If today’s U.S. GDP release prints positive numbers as a lot of analysts had expected, or if another round of risk aversion hits the London and U.S. markets, then we could see traders flock to the U.S. dollar and maybe push USD/JPY to the 105.00 or 105.50 levels.
A surprisingly weak U.S. GDP report, however, or a bit of risk-taking after the previous days’ losses, could weigh on the Greenback and drag USD/JPY closer to its 2020 lows. Yipes!