With the monthly close coming today which caps an October that saw a sharp run up in the prices of risky assets the USD has caught a bid. $89 Bn of this bid likely came from the Japanese Ministry of Finance and increased criticism of the European agreement has most markets risk averse to start the week. The bankruptcy filing by MF Global may have played a part in the day’s movement as the broker is a major player in many fixed income and derivative markets including European bonds.
European data underperformed today with an unexpected increase in the Italian unemployment rate and disappointing German retail sales for the month of September which fell 0.14%. US data was also lower than expected with the Chicago PMI slipping to 58.4 from 60.4. Expectations were for a smaller decline to 59.2. On a bright note Canadian GDP was stronger than forecasted rising 0.3% in August on consensus forecasts of 0.2%. This week has a number of headline events with three central bank meetings (RBA, Fed, ECB) and key data points from both the UK (Q3 GDP) and the US (NFP).
The EUR/USD has come off of its Thursday high and is testing short term support at 1.3980. A break here and the pair could shed another 70 pips to the October 17th high of 1.3910. Cable looks stronger prior to tomorrow’s glut of UK data. Resistance comes in at last week’s high/200-day moving average at 1.6150 with the next major resistance at the late August high of 1.6450.
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