Tuesday, September 30, 2014

Australian Home Prices Flat in Welcome News for RBA

Home prices in Australia’s capitals rose only marginally in September, slowing after three straight months of strong gains, with five of eight cities recording falls in the month.  The slowdown should actually be welcomed by the Reserve Bank of Australia (RBA)which recently has become concerned that a surge in borrowing to buy investment properties could lift prices to unsustainable levels.

The central bank is even considering whether banks should face tougher lending standards on some types of mortgages in an attempt to restrain investors.  Top RBA officials are due to appear before lawmakers on Thursday to answer questions on what measures might be proposed, and how to ensure they do not harm housing affordability or the supply of new homes.

Figures from property consultant RPData-Rismark showed dwelling prices in Australia’s major cities rose just 0.1 percent in September, from August when they climbed 1.1 percent.  Prices were up 9.3 percent on September last year, again pulling back from August’s 10.9 percent pace.

Reuters

Markets Deserting Commodities

Investors are betting that the worst isn’t over for commodity prices that already are the lowest in five years.

About $907 million was pulled from U.S. exchange-traded products backed by raw materials this month, the most since April, data compiled by Bloomberg show. Expanding surpluses, a surging dollar and slowing growth in China helped send the Bloomberg Commodity Index to the lowest since 2009, reversing first-half gains fueled by a polar vortex and dead pigs in the U.S., and escalating tensions in Ukraine and the Middle East.

Banks from Societe Generale SA to Citigroup Inc. expect the losses for many raw material to continue. U.S. farmers are collecting the biggest corn and soybean crops ever, and global stockpiles of nickel are at an all-time high. Americans are producing the most oil since 1986, compounding a global surplus. China, the largest consumer of grains, energy and metals, is poised for its slowest expansion in two decades.

Bloomberg

Canada is ‘Very Close’ to Eliminating Budget Gap

Canadian Finance Minister Joe Oliver said his government is getting “very close” to eliminating its deficit and is preparing to give a budget update that will stress fiscal prudence.

The budget update will send the message that Canada is “in good shape, relatively,” Oliver said in an interview with Erik Schatzker at the Bloomberg Canadian Fixed Income conference in New York today, adding the update usually comes in late October or early November.

“We’d like to grow faster,” he said. “We’re going to focus on creating more jobs, but the international financial environment is fragile. There are risks, particularly outside North America, and we have to remain fiscally responsible.”

Bloomberg

Corn Drops to $3.13 as Inventories Top Estimates

Corn futures dropped to a five-year low after the government said U.S. inventories before the start of this year’s harvest were bigger than analysts forecast.

Domestic stockpiles on Sept. 1 were 1.236 billion bushels, the U.S. Department of Agriculture said today. That compares with the agency’s estimate of 1.181 billion on Sept. 11. Analysts in a Bloomberg News survey expected 1.191 billion, on average.

Two years after the worst U.S. drought in decades drove corn prices to the highest ever, futures are slumping as three months of rain and mild weather boosted the outlook for yields. Farmers in the U.S., the world’s top producer, are set to collect a record harvest this year.

Bloomberg

Soybeans Down to $9.50 on Improving Crop Conditions

Soybean futures headed for the longest string of monthly losses since 2008 as improving crop conditions bolster the outlook for a record harvest in the U.S, the world’s biggest grower.

Domestic farmers are expected to harvest an all-time high of 3.913 billion bushels, 19 percent larger than last year’s crop, the U.S. Department of Agriculture estimates. Supplies are also rising from Brazil and Argentina, the second- and third-largest producers. Prices fell 11 percent in September, heading for a fifth straight monthly decline.

Two years after the worst U.S. drought in decades drove futures to a record, the oilseed is slumping as almost ideal weather boosts the outlook for yields. Soybeans in good or excellent condition made up 72 percent of the crop as of Sept. 28, up from 71 percent as week earlier, the USDA said yesterday. The agency will update its quarterly crop-inventory estimates at noon in Washington today.

Bloomberg

Gold Drops to $1206 as U.S. Dollar Advances

Gold futures fell to the lowest since January as the outlook for higher U.S. interest rates and a stronger dollar cut demand for precious metals as hedges against inflation. Silver dropped to a four-year low.

Money managers cut their bullish gold wagers for six straight weeks, the longest exit in more than four years, government data show. Global holdings in exchange-traded products backed by the metal last week shrunk to the lowest since 2009 as prices move close to erasing their 2014 gain.

Bullion, which rallied in the first half of the year amid escalating tensions in Ukraine and the Middle East, posted its first quarterly decline in 2014. Silver slumped 12 percent this month, the biggest decline since April 2013, when both metals fell into a bear market.

Bloomberg

Expanding Surpluses Sees Commodities Suffer Poor Quarter

Corn futures tumbled to a five-year low, gold is the cheapest since January and copper extended this year’s decline as raw materials posted their worst quarter since 2008.

The Bloomberg Commodity Index fell as much as 1.5 percent today, the biggest intraday loss since June 2013. U.S. corn inventories before the start of this year’s harvest were bigger than analysts forecast, the government said today. Holdings in bullion-backed exchange-traded products are near the lowest in five years amid waning investor demand.

Expanding surpluses, a surging dollar and slowing growth in China helped send the Bloomberg Commodity Index to the lowest since 2009 this month, reversing first-half gains fueled by a polar vortex and dead pigs in the U.S., and escalating tensions in Ukraine and the Middle East. Global stockpiles of nickel are at an all-time high, while Americans are producing the most oil since 1986, compounding a global surplus. China, the largest consumer of grains, energy and metals, is poised for its slowest expansion in two decades, analysts forecast.

Bloomberg

Fed Officials Watching Dollar for Rates Timing

The dollar’s strongest year since 2008 is a source of growing concern among some Federal Reserve policy makers, who say further gains have the potential to curb economic growth and keep inflation too low.

Atlanta Fed President Dennis Lockhart, New York’s William C. Dudley and Chicago’s Charles Evans have all said in the past week they are watching the dollar as officials debate the timing of the first interest-rate increase since 2006. A strong dollar tends to restrain exports by making them more expensive, holding back growth, while reducing the cost of imported goods.

“We’re going to take that into account, the way it’s affecting the economy in terms of net exports and GDP growth and what it means for our inflationary developments,” Evans told reporters yesterday after a speech in Chicago.

Bloomberg

EUR/GBP Below 0.78 After Economic Growth Revised

The pound rose versus the euro and headed for a sixth monthly advance after economic-growth data were revised higher. That stoked speculation the Bank of England will tighten policy as its European counterpart adds stimulus.

Sterling dropped against the dollar after a report showed Britain’s current-account deficit deteriorated in the three months through June. The U.K. economy grew faster than estimated in the second quarter, extending a recovery from a recession that was not as severe as previously thought. A separate report showed euro-area inflation slowed in September. U.K. government bonds fell before a sale of bonds due in 2027.

“Sterling is supported by solid data, expectations of a rate increase, and market positioning that makes the currency less vulnerable to bad news,” said Jane Foley, senior foreign-exchange strategist at Rabobank International in London. “Revisions by the Office for National Statistics suggested the recession we had was not as bad as we initially thought. That’s positive for the pound, especially against the euro.”

Bloomberg

China Official PMI Steady at 51.1

China’s manufacturing activity stayed steady in September, data showed Wednesday, a sign that economic growth is stabilizing.

The official Purchasing Managers’ Index (PMI) came in at 51.1, unchanged from August and a tad higher than Reuters’ expectations or 51.0. The reading also kept above the 50-mark which separates expansion from contraction.

Markets showed limited reaction to the news, with both Shanghai and Hong Kong closed for a public holiday. The Australia dollar also shrugged off the data.  The data follows Tuesday’s release of the HSBC final PMI reading for the month which came in at 50.2, also unchanged from the month before.

CNBC

USD/JPY Hits 110 for First Time Since 2008

The dollar rose above 110 yen for the first time since 2008 before a private report that may show companies in the U.S. added more than 200,000 jobs for a sixth month, adding pressure on the Federal Reserve to tighten policy.

The greenback also strengthened before official payrolls data due Oct. 3. Australia’s dollar slid to an eight-month low after retail sales grew less than economists forecast. South Korea’s won dropped amid speculation the nation’s authorities will take steps to weaken the currency. The euro fell toward its lowest in two years before the European Central Bank meets tomorrow amid concern about slowing inflation in the region.

The U.S. is the only major economy which is on a stable path towards monetary policy normalization, said Daisaku Ueno, the Tokyo-based chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “There is nothing else other than the dollar that people can buy.”

Bloomberg

US and India Hint at Deeper Economic Collaboration

President Barack Obama and India’s new Prime Minister Narendra Modi touted the potential for deeper economic collaboration between the world’s two largest democracies Tuesday, while seeking to address concerns that they have grown apart.

Following an Oval Office meeting, Obama praised Modi for his energetic approach to addressing India’s challenges since taking office in May. He singled out in particular the prime minister’s focus on addressing “the needs of the poorest of the poor,” as well as making India a source of peace and stability in the region.

Modi said the U.S. and India had a multitude of common economic priorities and pressed Obama to make it easier for Indian services companies to access American markets.

CNBC

IMF: Rich Countries Risk ‘permanently weak’ Demand

Advanced economies face “permanently weak demand” warned the International Monetary Fund (IMF) on Tuesday, which argued “the time may be right for an infrastructure push”.

According to the organization, infrastructure investment is “one of the few remaining policy levers available to support growth” – especially in the euro zone where despite accommodative monetary policy “there is still substantial economic slack, and inflation remains too low.”

“Borrowing costs are low and demand is weak in advanced economies, and there are infrastructure bottlenecks in many emerging market and developing economies,” said economists led by Abdul Abiad in the updated version of the IMF’s World Economic Outlook, out on Tuesday.

CNBC

U.S. Treasurys Steady after Weak Consumer Confidence

U.S. sovereign bonds edged higher after a report showed U.S. consumers were less confidante about the direction of the economy in September after hitting the highest level in nearly seven years last month.

The Conference Board says that its confidence index fell to 86.0, the first decline after four months of gains. It fell from a revised 93.4 in August, which had been the highest level since autumn 2007 before the Great Recession officially began in December 2007.

Benchmark 10-year Treasury notes yielded 2.49 percent on Tuesday, having fallen 5 basis points to close at 2.48 percent on Monday.

CNBC

BOJ’s Tankan Survey: Japan Business Sentiment Improves

Business sentiment in Japan improved in the three months to September, the Bank of Japan’s Tankan survey showed on Wednesday.  The headline index for big manufacturers’ sentiment rose to 13, above expectations of plus 10 in a Reuters poll and up from plus 12 in the previous quarter.

“The big manufacturers index is actually quite firm – we had been expecting manufacturing sentiment to come down a little bit considering that economic numbers have slowed but I think the weaker yen is lifting sentiment among manufacturers,” said Izumi Devalier, Japan economist at HSBC.

The report also showed that big firms plan to raise capital spending by 8.6 percent for the fiscal year that started in April, compared with analyst forecasts for a 7.2 percent increase.

CNBC

Asian Equities Lower with Eyes on China PMI

Asian stocks fell on the first day of the fourth-quarter as investors kept an eye on political unrest in Hong Kong and awaited key Chinese data.

Pro-democracy rallies in Hong Kong are expected to gain momentum as China’s week-long national day holiday kicks off on Wednesday. Protest organizers issued a midnight deadline for Chief Executive CY Leung to resign, warning that protests would spread otherwise.  Hong Kong markets are closed until Friday, while Shanghai markets are shut until October 7.

China’s official purchasing manager’s index (PMI) for September is due at 9:45am SIN/HK. A Reuters poll of economists expects the figure to fall to 51 from 51.1 in August. The data follows HSBC’s final PMI reading on Tuesday, which came in at 50.2 – unchanged from August.

CNBC

Gold Drops Below $1210 on U.S. Dollar Strength

Gold ended at its lowest level of the year, thus far, on Tuesday as the dollar climbed, posting its sharpest monthly loss since June 2013 and the first quarterly loss this year on expectations of further gains in the U.S. currency.

“The pressure is definitely on for gold to end the year in the red,” said Howie Lee, investment analyst at Phillip Futures.

“We see little in the way to stop gold’s downward slide, given that the Fed has made clear its intention to hike (rates) sooner than later and the Ukraine tensions have reached a fragile ceasefire,” Lee said, adding that a strong dollar will also weigh.

CNBC

Japan’s Unemployment Rate Falls to 3.5% in August

Japan’s unemployment rate dropped to 3.5 percent in August from 3.8 percent the previous month, marking the first improvement in three months, government data showed Tuesday, but the reduction was not necessarily a positive sign for the nation’s economy, according to an official.

Behind the fall in the rate is that unemployed women stopped looking for a job, the official at the Ministry of Internal Affairs and Communications said, indicating they have given up entering the workforce with the April 1 consumption tax hike hurting the economy.

The number of people who newly began seeking work fell a seasonally adjusted 120,000 to 660,000, the ministry said, adding the unemployment rate for women slid 0.5 percentage point to 3.2 percent while that for men was flat at 3.8 percent.

The jobless rate is the percentage of people who are unemployed but trying to find work. As those not seeking a job are not counted in Japan as unemployed, an increase in the number of people who have given up looking for work helps push the unemployment rate down.

The number of unemployed people decreased 180,000 to 2.30 million, but that of employed people increased only 70,000 to 56.06 million, the ministry said.

Separate data released by the Ministry of Health, Labor and Welfare showed the country’s job availability was flat from July. The ratio of employment offers to seekers stayed at 1.10 in August, which means 110 positions were available for every 100 job seekers.

The wholesale and retail industry and consumer-related services such as entertainment cut jobs from a year earlier, though the construction sector and the medical and welfare segment increased jobs, the internal affairs ministry said.

Japan’s job market may worsen ahead as the world’s third-biggest economy has been stalling in the wake of the 3-point consumption tax hike to 8 percent, possibly making companies more reluctant to boost employment, analysts said.

“Domestic demand is clearly sluggish and the economic outlook is uncertain. The labor market is unlikely to improve,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.

“The unemployment rate is expected to rise to 4 percent” by the end of this fiscal year through March 2015, he added.

The Japanese economy plummeted an annualized real 7.1 percent in the three months through June, suffering its worst setback since the first quarter of 2009 when it fell an annualized 15.0 percent following the 2008 global financial crisis.

Some experts forecast that the nation’s economy may not recover in the July-September period at a pace that can offset the plunge in the previous quarter.

via Mainichi

EU Inflation Slows to Five Year Low

Eurozone inflation slipped again in September, with prices rising at their slowest rate in nearly five years.

Consumer price inflation rose by just 0.3% compared to the same month last year, slowing from August’s 0.4% rise, said EU statistics agency Eurostat.

It is the lowest level for eurozone inflation since October 2009, adding to fears of a deflationary spiral.

Inflation has been persistently below the European Central Bank’s (ECB) 2% target rate.

Eurostat said falls in the prices of unprocessed food and energy had driven the overall slowdown.

Unprocessed food prices fell 0.9% year-on-year, while energy dropped 2.4%.

Earlier this month, the European Central Bank cut its benchmark interest rate to 0.05%, and introduced new stimulus measures in an attempt to kick-start the eurozone economy.

However, the dramatic move fell short of a programme of buying government bonds – a process known as quantitative easing (QE), and one which the US Federal Reserve has undertaken.

via BBC

Japan’s Nikkei Falls After Weak Japanese Manufacturing Data

Eurozone inflation slipped again in September, with prices rising at their slowest rate in nearly five years.

Consumer price inflation rose by just 0.3% compared to the same month last year, slowing from August’s 0.4% rise, said EU statistics agency Eurostat.

It is the lowest level for eurozone inflation since October 2009, adding to fears of a deflationary spiral.

Inflation has been persistently below the European Central Bank’s (ECB) 2% target rate.

Eurostat said falls in the prices of unprocessed food and energy had driven the overall slowdown.

Unprocessed food prices fell 0.9% year-on-year, while energy dropped 2.4%.

Earlier this month, the European Central Bank cut its benchmark interest rate to 0.05%, and introduced new stimulus measures in an attempt to kick-start the eurozone economy.

However, the dramatic move fell short of a programme of buying government bonds – a process known as quantitative easing (QE), and one which the US Federal Reserve has undertaken.

via BBC

Uk House Prices Fall For First Time in 17 Months

British mortgage lender Nationwide recorded the first monthly fall in house prices for more than a year this month, causing the annual rate of house price growth to fall to an eight-month low.

Nationwide said that average house prices across Britain fell by 0.2 percent in September – the first drop in 17 months – after rising by 0.8 percent in August.

House prices are now 9.4 percent higher than a year earlier, the smallest increase since February and down from August’s 11.0 percent growth rate.

via CNBC

IMF Urges Nations to Boost Infrastructure Singles Out US and Germany

A decline in infrastructure spending over the last 30 years needs to be reversed to boost growth, according to the International Monetary Fund, which meets next week in Washington against a backdrop of slowing global growth.

The IMF said the benefits of debt-financed infrastructure projects could give an important boost to economic growth especially when the world is threatened by a long period of stagnation.

In documents released before its revised economic outlook, it urged governments to examine where infrastructure investments could benefit longer-term growth.

It said: “Debt-financed projects could have large output effects without increasing the debt-to-GDP ratio, if clearly identified needs are met through efficient investment. In other words, public infrastructure investment could pay for itself if done correctly.”

The report singles out the US and Germany as in need of large-scale infrastructure investment following a stream of critical reports from the business community over the upkeep of road and rail networks.

It says the US needs to act to arrest the decline in its network of roads.

“As the American Society of Civil Engineers notes, 32% of major roads in the US are now in poor or mediocre condition, and the US Federal Highway Administration estimates that between $124bn and $146bn annually in capital investment will be needed for substantial improvement in conditions and performance – considerably more than the $100bn spent on capital improvements at all government levels,” it said.

George Osborne is likely to take some comfort from the analysis, which brackets the UK with Canada, Italy, France and Japan as having an improving level of infrastructure, “albeit from relatively low levels”.

The IMF, which acts as lender of last resort to struggling countries, has been a keen supporter of infrastructure investment since the financial crash as a way to boost employment and increase productivity. Better roads and rail, digital infrastructure and power networks support local businesses and help them increase output at lower costs.

via The Guardian

Australian Loans to Housing Investors Grew At Twice the Rate of Homeowners

The value of loans to housing investors has surged at twice the rate of those to homeowners in August, lifting by 0.8%, or $3.7bn, to $417.1bn.

The figures add weight to the comment by the Reserve Bank of Australia in its financial stability review last week that housing credit has become “unbalanced”.

And they will encourage calls for the RBA to use “macroprudential” tools – rules and regulations – rather than just interest rates to rein in lending and prevent a dangerous boom/bust cycle in the housing market.

The overall amount that Australians owe on mortgages has notched up its fastest annual growth for three and half years. And the rise in investor loan value in the six months to August, 9.9% on an annualised basis, was the fastest since 2007, before the global crisis bit into banks’ ability to lend.

Housing debt rose by $7.7bn or 0.6%, between July and August. That lifted annual growth from 6.5% to 6.7%, its fastest rise since early 2011. Loans to homebuyers rose 0.4%, or $3.7bn, to $918.8bn.

The figures from the RBA on Tuesday don’t include cross-border lending, such as loans made by the offshore branches of Australian banks to buy properties in Australia.

Other measures of credit in the RBA’s figures were more subdued. Credit to businesses, aside from residential property loans, was unchanged in August, with annual growth of 3.2% barely beating consumer prices.

And other lending to households, which includes loans to buy shares as well as traditional consumer spending, was up only 0.2%, with annual growth at 1.1%.

via The Guardian

UK Economy Grew 0.9% in Q2

UK economic growth has been revised up to 0.9% for the second quarter of the year by the Office for National Statistics (ONS), compared with a previous estimate of 0.8%.

UK GDP was 3.2% higher in the second quarter compared with a year earlier.

Revised ONS figures also show the UK economy surpassed its pre-recession peak in the third quarter of 2013.

Previously, this was thought to have been achieved in the second quarter of 2014.

The figures from the ONS include a new methodology for calculating gross domestic product (GDP). The new measure includes factors such as spending on research and development, as well as the economic contribution made by drug dealers and prostitutes.

The ONS now estimates that GDP was 2.7% higher than its pre-crisis peak by the end of the second quarter this year.

However, the ONS also revised its estimate of growth in the first quarter of the year down to 0.7% from an earlier estimate of 0.8%.

via BBC

AUD/USD – Slight Gains Ahead of Australian Retail Sales

The Australian dollar has posted small gains on Tuesday, as AUD/USD trades in the mid-0.87 range in the North American session. In the US, CB Consumer Confidence fell to 86.0 points, well short of expectations. Today’s only Australian release, Private Sector Credit, posted a gain of 0.4%. The markets are keeping a close eye on Australian Retail Sales, a key event which can affect the direction of AUD/USD.

The wobbly Aussie looked awful last week, shedding about 180 points against the sharp US dollar. For the month of September, the currency has plunged a remarkable 600 points. Will the downward spiral continue this week? The RBA should be pleased at the Aussie’s vanishing act, as the central bank has often expressed its unease at the currency’s high value, which has weighed on economic growth.

Earlier in the week, US Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. The important housing indicator has shown strong movement, resulting in readings that have been well off market estimates. US housing indicators continue to paint a mixed picture, as New Home Sales jumped last month, while Existing Home Sales softened and was well short of  expectations.

AUD/USD for Tuesday, September 30, 2014

AUD/USD September 30 at 14:30 GMT

AUD/USD 0.8751 H: 0.8768 L: 0.8694

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.8456

0.8550

0.8668

0.8763

0.8820

0.8953

AUD/USD moved higher in the Asian session, breaking past resistance at 0.8768.  This line recovered as the pair lost ground in the European session. AUD/USD has resumed moving upwards in North American trade.

0.8668 is providing strong support.

On the upside, 0.8763 was breached but has recovered. It remains a weak line. 0.8820 is stronger.

Current range: 0.8668 to 0.8763

Further levels in both directions:

Below: 0.8668, 0.8550, 0.8456 and 0.8315

Above: 0.8763, 0.8820, 0.8953, 0.9020 and 0.9119

OANDA’s Open Positions Ratio

AUD/USD ratio is pointing to gains in long positions on Tuesday. This is consistent with the pair’s movement, as the Aussie has posted small gains. The ratio has a majority of long positions, indicative of trader bias towards AUD/USD moving to higher ground.

AUD/USD Fundamentals

1:30 Australian Private Sector Credit. Estimate 0.5%. Actual 0.4%.

13:00 US S&P Composite-20 HPI. Estimate 7.5%.

13:45 US Chicago PMI. Estimate 61.6 points.

14:00 US CB Consumer Confidence. Estimate 92.2 points.

* Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

USD/JPY – Soft Yen Close to 110 After Mixed Japanese Data

The Japanese yen has edged higher on Tuesday, as USD/JPY trades in the mid-109 range in the North American session. On the release front, Japanese numbers were mixed on Monday. Household Spending and Preliminary Industrial Production both posted declines and missed expectations. However, Retail Sales posted a strong gain and climbed to a four-month high. On Tuesday, Average Cash Earnings came in at 1.4%, above the estimate. Later in the day, we’ll get a look at the Tankan indices, which traders should treat as market-movers. In the US, Consumer Index slipped to 86.0 points, short of expectations.

The Japanese yen is within striking distance of the psychological barrier of 110, and mixed numbers on Tuesday were of little help to the struggling currency. Japanese Household Spending posted a decline of 4.7%, better than last month but worse than the estimate of -3.5%. Preliminary Industrial Production posted its second decline in three months, with a reading of -1.5%. This was well short of the estimate of +0.2%. On a brighter note, Retail Sales improved to 1.2%, easily beating the estimate of 0.4%. This was the indicator’s best showing in five months.

Over in the US, Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. The important housing indicator has shown strong movement, resulting in readings that have been well off market estimates. US housing indicators continue to paint a mixed picture, as New Home Sales jumped last month, while Existing Home Sales softened and was well short of  expectations.

USD/JPY for Tuesday, September 30, 2014

USD/JPY September 30 at 13:25 GMT

USD/JPY 109.72 H: 109.85 L: 109.19

USD/JPY Technical

S3

S2

S1

R1

R2

R3

106.85

107.68

108.58

109.82

110.68

112.48

USD/JPY edged lower in the Asian session. The pair reversed directions in European trade and broke through resistance at 109.85 before retracting.

108.58 is providing strong support.

On the upside, 109.82 is under strong pressure. 110.68 is stronger. This line has remained intact since August 2008.

Current range: 108.58 to 109.82

Further levels in both directions:

Below: 108.58, 107.68, 106.85, 105.44 and 104.17

Above: 109.82, 110.68, 112.48, 113.68 and 114.65

OANDA’s Open Positions Ratio

USD/JPY ratio is pointing to gains in long positions on Tuesday. This is consistent with the pair’s movement, as the dollar continues to post gains. The ratio has a majority of short positions, indicative of trader bias towards the yen reversing direction and moving higher.

USD/JPY Fundamentals

1:30 Japanese Average Cash Earnings. Estimate 1.1%. Actual 1.4%.

5:00 Japanese Housing Starts. Estimate -13.9%. Actual -12.5%.

13:00 US S&P Composite-20 HPI. Estimate 7.5%.

13:45 US Chicago PMI. Estimate 61.6 points.

14:00 US CB Consumer Confidence. Estimate 92.2 points.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

MarketPulse Scoops FX Media Resource Award

British financial news publisher names MarketPulse “Best Forex Media Resource” for 2014

MarketPulse, a global macroeconomic analysis news site, was named the “Best Forex Media Resource” at the 2014 U.K. Forex Awards.

“We are chuffed to be named the ‘Best Forex Media Resource’ at the 2014 U.K. Forex Awards. It’s a tremendous honor for our entire team to win this award,” said Dean Popplewell, Vice President of Currency Analysis and Research, OANDA. “It is our goal to provide investors with accurate, informative, timely business and finance information so they are aware of what is impacting financial markets and their individual portfolios and investments. We greatly appreciate this important award which recognizes our ongoing efforts to keep investors all around the world in the know.”

MarketPulse features a global team of securities analysts and strategists at OANDA who publish insightful research and commentary that features extensive coverage of forex, commodities, and stock market indices. The paywall-free site also serves up insight into short- and long-term financial market trends.

The 2014 U.K. Forex Awards are managed and presented annually by London-based MSM Media Ltd., producers of several finance-focused publications including Shares Magazine, DIY Investor, MoneyAM, ForexWire and MRQ.

To subscribe to MarketPulse, please visit www.MarketPulse.com. Follow us on Twitter, Facebook, and Google+.

About MarketPulse

Established in 2006, MarketPulse is a free news site that provides coverage of the world’s largest financial markets. Our team of securities analysts and strategists provide informative research and commentary on major macroeconomic trends, technical analysis, and worldwide events that impact different asset classes and investors.

Surging US Dollar Pushes Gold to Lowest Levels of 2014

Gold remains under pressure on Tuesday, as the metal continues to lose ground to the strong US dollar. In the European session, the spot price stands at $1207.40 per ounce. On the release front, today’s key event is CB Consumer Confidence, with the markets expecting another strong reading above the 90-point level.

The sharp gains by the US dollar is weighing on gold prices, as a stronger dollar diminishes the metal’s appeal as an alternative asset to the dollar. The dollar has enjoyed a spectacular September, and gold prices have tumbled over 6% during this period. We could see gold dip below $1200, which last occurred in December.

Over in the US, Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. The important housing indicator has shown strong movement, resulting in readings that have been well off market estimates. US housing indicators continue to paint a mixed picture, as New Home Sales jumped last month, while Existing Home Sales softened and was well short of  expectations.

XAU/USD for Tuesday, September 30, 2014

XAU/USD September 30 at 12:30 GMT

XAU/USD 1207.40 H: 1218.90 L: 1204.45

XAU/USD Technical

S3

S2

S1

R1

R2

R3

1136

1156

1186

1210

1240

1252

XAU/USD was flat in the Asian session. The pair has posted losses in European trade, breaking below support at 1210.

11186 is an immediate support level. 1156 is next.

1210 has reverted to a resistance role as gold trades at lower levels. This line is fluid and could see further action during the day. There is stronger resistance at 1240.

Current range: 1210 to 1240.

Further levels in both directions:

Below: 1186, 1156, 1136 and 1101

Above: 1210, 1240, 1252, 1275 and 1300

OANDA’s Open Positions Ratio

XAU/USD ratio is pointing to gains in short positions in Tuesday trade. This is consistent with the pair’s movement, as gold has sustained losses. The ratio has a substantial majority of long positions, indicative of trader bias towards gold reversing directions and moving to higher ground.

XAU/USD Fundamentals

13:00 US S&P Composite-20 HPI. Estimate 7.5%.

13:45 US Chicago PMI. Estimate 61.6 points.

14:00 US CB Consumer Confidence. Estimate 92.2 points.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

EUR/USD – Euro Tumbles on Weak CPI Data

EUR/USD is trading in the high 1.27 range, its lowest level since September 2012. The euro sagged after the release of Eurozone CPI, which dipped 0.3% in September. German news was mixed, as Retail Sales jumped 2.5%, but Unemployment Change was up sharply. The Eurozone unemployment rate was unchanged at 11.5%. In the US, today’s key event is CB Consumer Confidence, with the markets expecting another strong reading above the 90-point level.

The euro has lost over 100 points on Tuesday, as the common currency shows no signs of halting its sharp descent. It’s been a disastrous September for the euro, which has shed over 500 points against the US dollar. The euro reacted sharply to the Eurozone CPI reading of 0.3%, which matched the forecast but was weaker than the 0.4% in August. The inflation rate has now been under 1% for twelve straight months, way off the ECB’s target of just below 2%. On Monday, German Preliminary CPI posted a flat reading of 0.0% for the second straight month. The ECB is feeling the pressure to act, but as Mario Draghi knows all too well, there isn’t any magic formula to creating inflation and improving economic growth.

Over in the US, Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. The important housing indicator has shown strong movement, resulting in readings that have been well off market estimates. US housing indicators continue to paint a mixed picture, as New Home Sales jumped last month, while Existing Home Sales softened and was well short of  expectations.

EUR/USD for Tuesday, September 30, 2014

EUR/USD September 30 at 10:30 GMT

EUR/USD 1.2579 H: 1.2702 L: 1.2571

EUR/USD Technical

S1

S2

S1

R1

R2

R3

1.2286

1.2407

1.2518

1.2688

1.2806

1.2905

EUR/USD was flat in the Asian session, trading close to resistance at 1.2688. The pair has posted sharp losses in European trade.

1.2518 continues to provide support.

1.2688 has some breathing room as the euro trades at lower levels.

Current range: 1.2518 to 1.2688

Further levels in both directions:

Below: 1.2518, 1.2407, 1.2286 and 1.2144

Above: 1.2688, 1.2806, 1.2905, 1.2984 and 1.3104

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions on Tuesday. This is not consistent with the pair’s movement, as the euro has posted strong losses. The ratio has a majority of long positions, indicative of trader bias towards the euro reversing its steep slide and moving upwards.

EUR/USD Fundamentals

6:00 German Retail Sales. Estimate 0.6%. Actual 2.5%.

July Data - French Consumer Spending. Estimate -0.3%. Actual -0.7%.

6:45 French Consumer Spending. Estimate -0.2%. Actual +0.7%.

7:55 German Unemployment Change. Estimate -2K. Actual 12K.

8:00 Italian Monthly Unemployment Rate. Estimate 12.6%. Actual 12.3%.

9:00 Eurozone CPI Flash Estimate. Estimate 0.3%. Actual 0.3%.

9:00 Eurozone Core CPI Flash Estimate. Estimate 0.9%. Actual 0.7%.

9:00 Eurozone Unemployment Rate. Estimate 11.5%. Actual 11.5%.

9:00 Italian Preliminary CPI. Estimate -0.3%. Actual -0.3%.

13:00 US S&P Composite-20 HPI. Estimate 7.5%.

13:45 US Chicago PMI. Estimate 61.6 points.

14:00 US CB Consumer Confidence. Estimate 92.2 points.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

EUR loses foothold on the Crosses

The 18-member single unit has managed to fall to a fresh two-year low outright this morning, briefly penetrating the psychological €1.26 handle (€1.2595), just as capital market-bid farewell to another volatile September and third quarter. While at the same time Euro equities have been edging higher, trying to revers in part some of yesterday’s decline while waiting for this morning’s inflation data that some investors expect could very much shape the ECB’s next move.

From a global perspective, the key to any defining rally or equity retreat currently lies with Hong Kong. Growing protest in the region is once again encouraging many investors to stay on the sidelines. Regional indices have wavered to the downside on signs that the standoff between Occupy Central and the authorities will not be subsiding any time soon. Ahead of the start of China’s National Day holidays, the Shanghai Composite and the Hang Seng have both been finding it difficult to maintain positive traction. Currently, HK chief Leung is warning local businesses that protests may last for a long time, but also noted there is no need to ask for deployment of the PLA (China People’s Liberation Army), expressing confidence in local authorities. Emerging market currencies are relatively quiet compared to yesterday, with no real ‘fresh’ news coming from the protests in Hong Kong. All the forex action has so far been driven out of Europe.

Euro inflation falls further

Putting further pressure on the EUR this morning is the eurozone’s annual rate of inflation having fallen further below the ECB’s target in September, to it’s lowest level in five-years. The eurozone’s flash HICP has come in at +0.3%, which compares to a final reading of +0.4% in August. After the German HCIP surprise yesterday (+0.0% vs. -0.1%) it was expected that the headline number would come as expected. But more of an interest is the core-rate of inflation; it has fallen to +0.7% compared to +0.9% – further weighing on the EUR outright and on the crosses (GBP and JPY in particular). Many believe that a result below expectations would be of particular interest to Draghi and company, as inflation to them is the ECB’s official argument that might lead to QE. Nevertheless, a decline was mostly expected and is unlikely to prompt an immediate response from the ECB this Thursday at its monetary policy meeting in Italy.

ECB policy makers are still expected to take some time to access the impact of the two waves of stimulus programs introduced last June (negative deposit rates/ further credit and purchases of ABS/covered bonds). Many forecasters do not anticipate euro policy makers to jump the gun as they believe the “base effect” (food and energy prices – which are historically very low) to climb in October. Nevertheless, Euro inflationary pressures are likely to remain soft for some time. Euro survey’s released yesterday revealed that both businesses and consumers were more ‘downbeat’ about their prospects in September than anytime since the end of last-year.

So far, the initial market reaction to the softer inflation reading has both US treasuries and Gilt yields rising after declining during yesterday’s session. While eurozone debt yields are moving lower following the CPI data. European officials, especially the French, continue to express their content with a weaker EUR. It’s not surprising to see peripheral equity indices being supported by the weaker than expected core-CPI data.

The EUR cross sees ‘red’

On the cross, the 18-member single unit continues to naturally underperform. Cable managed a kneejerk 1.6275 high after a +0.1% upward revision to the UK’s Q2 GDP, to +0.9% and then saw it’s subsequent low outright so far (1.6194) as the market’s focused shifted to the bigger UK current account deficit (-23b vs. -17b expected or +5.2% of GDP). The pound’s break of the 1.62 handle was spurred by the EUR’s outright losses on the back of weaker inflation data. This has managed to push EUR/GBP to a 26-month low €0.77785. Asia’s low at 1.6225 is now a cable resistance level while the sterling bear’s will now be targeting 1.6162, the mid-September low and 1.6052 (10-month low on September 10).

Yen handcuffed for now

USD/JPY has been trading heavy on Japanese fiscal year-end flows with many investors happy to lock in profits on USD’s and Nikkei longs. It seems that Japanese portfolio are happy to pare back some of their global stock allocations. BoJ officials remain optimistic. Expect the market to begin to anticipate further measures only if September data happens to be weak as well. Currently, Japanese exporters are dollar sellers ahead of 109.75 and the highly profile 110.00 level. Japanese importers and investors have bids scattered ahead of 109.00. AS to be expected EUR/JPY (€138.20) under pressure from the EUR’s outright move lower on the back of a weak eurozone inflation report.

Forex heatmap

China’s PMI from HSBC for September at 50.2

A Chinese manufacturing gauge fell from an initial reading a week ago as a property slump weighs on the world’s second-largest economy.

The Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics for September was at 50.2, lower than the preliminary figure of 50.5 and unchanged from August. Numbers above 50 signal expansion. The Hang Seng Index in Hong Kong extended losses after the report.

Economists have cut estimates for this year’s gross domestic product growth after data on industrial profits, factory output and credit showed a deteriorating outlook. While the government has set an expansion target of about 7.5 percent for this year, Premier Li Keqiang and other policy makers have insisted for months they don’t need strong stimulus measures.

Bloomberg

AUD/USD – Takes a Breather Above 0.87

AUD/USD for Tuesday, September 30, 2014

The last few weeks has seen a strong decline for the Australian dollar moving from close to 0.94 down to near 0.87 and an eight month low in the process.   In the last day or so it has taken a breather just above 0.87.   A couple of weeks ago the Australian dollar found some much needed support at 0.8950 and rallied back up to just shy of the key 0.90 level before resuming its decline. The long term key level at 0.90 was called upon to desperately provide some much needed support to the Australian dollar, which it did a little a couple of weeks ago, however it has more recently provided resistance. Several weeks ago the Australian dollar showed some positive signs as it surged higher again bouncing off support below 0.93 and reaching a new four week high around 0.94 however that all now seems a distant memory.

The Australian dollar reached a three week high just shy of 0.9480 at the end of July after it enjoyed a solid period which saw it surge higher through the resistance level at 0.9425 to the three week around 0.9480, before easing back towards that level. The Australian dollar enjoyed a solid surge higher reaching a new eight month high above 0.95 at the end of June, only to return most of its gains in very quick time to finish out that week. Since the middle of June the Australian dollar has made repeated attempts to break through the resistance level around 0.9425, however despite its best efforts it was rejected every time as the key level continued to stand tall, even though it has allowed the small excursion to above 0.95.

After the Australian dollar had enjoyed a solid surge in the first couple of weeks of June which returned it to the resistance level around 0.9425, it then fell sharply away from this level back to a one week low around 0.9330 before rallying higher yet again. Its recent surge higher to the resistance level around 0.9425 was after spending a couple of weeks at the end of May trading near and finding support at 0.9220.  Throughout April and into May the Australian dollar drifted lower from resistance just below 0.95 after reaching a six month high in that area and down to the recent key level at 0.93 before falling lower. During this similar period the 0.93 level has become very significant as it has provided stiff resistance for some time. The Australian dollar appeared to be well settled around 0.93 which has illustrated the strong resurgence it has experienced throughout this year.

Australian house prices flattened in September after the strongest winter gains in seven years.  A daily home value index for mainland state capitals compiled by RP Data and CoreLogic was down 0.3 per cent in the first 26 days of September, compared with the average for all of August.  But the trend picked up late in the month, making a “relatively flat” result likely for the month as whole, RP Data research director Tim Lawless said.  “The first month of spring has seen housing market conditions remain buoyant with clearance rates consistently above the 70 per cent mark on a weighted capital city basis and agents continuing to report strong housing market activity,” he said.  “From a valuations perspective we have seen a flattening in the rate of capital gains over the month of September.”  The September result would bring the three-monthly growth rate for prices back to about 2.5 per cent, a “healthy reduction” from growth of 4.2 per cent over the three months to August, Mr Lawless said.   “With the debate around sustainability of dwelling values heating up, the softer September result should be viewed as a welcome evolution in the housing market, although it remains to be seen whether these softer conditions will persist throughout the rest of Spring.”  The final figures for September, which will include data for smaller capitals and regional areas, are due for release on Wednesday.

(Daily chart / 4 hourly chart below)

a_20140930 a_20140930_4hour

AUD/USD September 29 at 23:40 GMT   0.8720   H: 0.8722   L: 0.8715

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.8700

—

—

0.9000

0.9100

0.9425

During the early hours of the Asian trading session on Tuesday, the AUD/USD is trying to edge higher back up to the 0.88 level, after falling down even further to finish out last week. The Australian dollar was in a free-fall for a lot of last year falling close to 20 cents and it has done very well to recover slightly to near 0.95 again earlier this year. Current range: trading right around 0.8720.

Further levels in both directions:

• Below: 0.8700.

• Above: 0.9000, 0.9100 and 0.9425.

OANDA’s Open Position Ratios

a_20140930_ratio

(Shows the ratio of long vs. short positions held for the AUD/USD among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for the AUD/USD has moved right back to 60% as the Australian dollar has fallen below 0.88 for the first time since February 2014. The trader sentiment remains in favour of long positions.

Economic Releases

23:30 (Mon) AU AIG Manufacturing PMI (Sep)

23:50 (Mon) JP Tankan (Q3)

00:00 NZ NBNZ Business Confidence (Sep)

01:30 AU Private Sector Credit (Aug)

03:00 NZ Monetary Aggregates M3 (Aug)

05:00 JP Construction orders (Aug)

05:00 JP Housing starts (Aug)

08:30 UK Current Account (Q2)

08:30 UK GDP (3rd Est.) (Q2)

08:30 UK Index of Services (Jul)

09:00 EU Flash HICP – Core (Sep)

09:00 EU HICP

09:00 EU Unemployment (Aug)

12:30 CA GDP (Jul)

12:30 CA Industrial product price index (Aug)

12:30 CA Raw Materials Price Index (Aug)

13:00 US S&P Case-Shiller Home Price (Jul)

13:45 US Chicago PMI (Sep)

14:00 US Consumer Confidence (Sep)

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

ECB Awaiting EU Bureaucracy Decision on ABS

The European Central Bank will this week unveil details of its plan to save the eurozone from economic stagnation by buying hundreds of billions of euros-worth of private-sector assets. But one of the most crucial questions surrounding the purchases of bundles of loans, known as asset-backed securities, looks set to remain unanswered for some time.
The governing council will meet in Naples, where it is expected on Thursday to reveal which asset-backed securities and covered bonds the central bank plans to buy to revive growth and boost inflation. Analysts say inflation is likely to have fallen to a five-year low this month.

The purchases will work in tandem with the central bank’s offers of cheap four-year loans, under what it dubs its targeted longer term refinancing operations, to bloat its balance sheet by as much as €1tn between now and the end of 2016.

But one of the most vital pieces of information about the programme will almost certainly be missing.

Whether the ECB can buy the riskier parts of securitisations, the so-called mezzanine tranches, is up to governments. With the new European Commission not yet in place, eurozone finance ministers are unlikely to discuss the issue until the end of October, with a decision weeks later. The early indications are that Germany and France will not support the plan.

The ECB’s president, Mario Draghi, said earlier this month that the central bank would buy the safest slices of securitisations, known as senior tranches. But the ECB is cautious of taking too much risk on to the central bank’s balance sheet. To avoid that, Mr Draghi said the ECB would buy the mezzanine tranches only if governments would guarantee any losses.

via CNBC

Draghi’s Dilemma

It seems as though the European Central Bank (ECB) has been debating whether to head down the quantitative easing (QE) path forever. ECB-watchers have been reduced to pondering what Mario Draghi’s (usually) various shades of blue ties might mean for future asset purchases.

This week, the bank is expected to announce the details of its first round of what is being called by many private-sector QE, no matter how reluctant Draghi may be to label it as such.

When first announced, the mass buying of private-sector assets seemed to be the fillip markets have been hoping for – especially as, if it follows the pattern established by the U.S. Federal Reserve, there may be public-sector asset purchases soon (within six months, according to Mark Wall, chief economist at Deutsche Bank).

CNBC

RBI Sits at 8%

India’s central bank kept its key policy repo rate unchanged at 8.0 percent on Tuesday, as widely expected, while expressing concerns about risks to its target to bring consumer inflation down to 6 percent by January 2016.

The Reserve Bank of India (RBI) also kept both the statutory liquidity ratio (SLR) and the cash reserve ratio (CRR) unchanged. SLR is the minimum bond holding requirements that lenders must set aside, while CRR determines the percentage of bank deposits that must be kept at the central bank.

However, it said it would cut the ceiling on bonds that must be held-to-maturity from the current 24 percent to 22 percent in stages starting in the bi-weekly cycle beginning in Jan. 10, 2015. It expects to complete the process by September 2015.

CNBC

Asian Equities Mixed

Asian equities were mixed on Tuesday amid caution over developments in Hong Kong and as investors focused on data in China and Japan.  Protesters remained on Hong Kong’s streets on Tuesday, spreading to areas of Admiralty, Causeway Bay and Mong Kok in Kowloon, but police have been absent, according to local media.

“The region’s second largest index will again be the focal point for Asian markets, as Hong Kong sees its largest civil unrest since the 60s. With Chinese National Day (a public holiday) tomorrow, the likelihood of the crowds increasing is mounting,” said Evan Lucas, market strategist at IG.

On the economic front, Japan’s August data deluge was mixed with household spending and industrial output coming in worse than expected, while retail sales beat forecasts. Meanwhile, HSBC’s China final manufacturing report for September came in at 50.2, unchanged from August.

CNBC

RBI Sits Again in Fight Against Inflation

India’s central bank left interest rates unchanged for a fourth straight meeting, continuing a fight against Asia’s fastest inflation as Prime Minister Narendra Modi takes steps to revive the manufacturing sector.

Governor Raghuram Rajan kept the benchmark repurchase rate at 8 percent, the Reserve Bank of India said in a statement in Mumbai today, a move predicted by all 51 economists in a Bloomberg survey. While the near-term consumer price inflation outlook is balanced “with a slant to the downside,” risks to the January 2016 target of 6 percent are “still to the upside, though somewhat lower than in the last policy statement.”

“This continues to warrant policy preparedness to contain pressures if the risks materialize,” Rajan said in a statement today. Future policy stances will be influenced by the RBI’s inflation projections concerning the January 2016 target of 6 percent, he said.

Bloomberg

Production Data Challenges PM Abe’s Growth Strategy

Weak industrial production data from Japan today raises concern that the world’s third-largest economy may be back in recession, challenging Prime Minister Shinzo Abe’s growth strategy.

Output, a key component of the Coincident Index (JNCICCOI) that’s used by the Cabinet Office to determine peaks and troughs in the business cycle, unexpectedly fell in August. It’s now dropped in three of the five months since an increase in the sales tax in April.

Abe’s administration is “almost certain” to downgrade its assessment of the economy from “standstill” to “change of phase” when the August figure for the gauge is released next week, said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo. This indicates a high probability of being in recession, according to the Cabinet Office’s own guidance on the index.

Bloomberg

West TX Oil Rallies to $95.40 on U.S. Economy

West Texas Intermediate rose to the highest in almost two weeks on speculation stronger U.S. economic growth will boost demand for oil. WTI’s discount to Brent narrowed to a one-year low.

Futures climbed 1.1 percent after a government report showed consumer spending in the U.S. rebounded in August. Gasoline advanced for the fourth time in five days on concern refinery shutdowns will reduce production. Both WTI and Brent are headed for their biggest quarterly loss in more than two years as supply gains shield the market from the U.S.-led military campaign against Islamic State.

“The fact that the U.S. economy looks bullish and the gasoline price is elevated is pulling up oil prices,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Bloomberg

Ample Supply Sees Oil Heading for Large Quarterly Loss

Brent and West Texas Intermediate headed for the biggest quarterly decline in more than two years amid speculation that rising crude output would buffer the market from potential supply disruptions in the Middle East.

Futures slid as much as 0.2 percent in London and are down 13 percent from the beginning of July. The U.S. and its European and Arab allies have conducted thousands of air missions since starting a bombing campaign to counter Islamic State militants in Syria and Iraq, OPEC’s second-largest producer. U.S. crude stockpiles probably expanded by 1.5 million barrels last week, a Bloomberg News survey shows before an Energy Information Administration report tomorrow.

“Compared with 2011 and 2012 when we had issues with Libya and Iran, which resulted in a sharp rise in oil prices, we’re quite stable now despite the geopolitical conflicts,” Hong Sung Ki, a senior commodities analyst at Samsung Futures Inc. in Seoul, said by phone today. “The biggest difference between now and then is the increasing crude production in the U.S.”

Bloomberg

China’s Final HSBC PMI at 50.2 in September

China’s manufacturing activity stayed steady in September, the final HSBC Purchasing Managers’ Index (PMI) showed on Tuesday, but the reading was lower than the initial print.

The PMI came in at 50.2, unchanged from August and down from the 50.5 flash estimate, but stayed above the boom-bust level of 50.  A sub-index measuring new export orders, a gauge of external demand, expanded to a 4-1/2-year-high of 54.5.

But the survey also pointed to further weakness in the job market, as the sub-index for manufacturing employment shrank for the 11th consecutive month, which is bound to concern China’s Communist leaders.

CNBC

U.S. Dollar Headed for Strong Quarter

The dollar headed for its best quarter since 2008 with reports this week predicted to reinforce U.S. economy is strong enough for the Federal Reserve to raise rates next year while recoveries in Japan and Europe falter.

The U.S. currency has appreciated at least 1.9 percent against all of its 16 most active counterparts since June 30 amid prospects of higher U.S. interest rates. The yen was set for its first quarterly decline in 2014 after industrial production unexpectedly fell, while the euro held near a 22-month low before data that may show the currency region’s inflation stayed at the lowest since 2009. A gauge of emerging-market peers headed for the biggest monthly drop since May 2013.

“Economic indicators this week will likely show a strong U.S. and weak Japan and Europe,” said Yujiro Goto, a currency strategist in London at Nomura Holdings Inc. “The trend of a strong dollar against the yen and euro will stay.”

Bloomberg

Asian Equities Fall with Eyes on Hong Kong

Asian stocks fell, with the regional index headed for its biggest monthly drop since May 2012, amid concern over tensions in Hong Kong and as a Chinese manufacturing gauge missed estimates. The dollar held its largest quarterly advance since the global financial crisis.

The MSCI Asia Pacific Index slipped 1.1 percent by 11:44 a.m. in Tokyo, pushing it down 5.6 percent in September. The Hang Seng Index dropped 1.4 percent as pro-democracy protests continued to choke off roads around the city. Standard & Poor’s 500 Index futures fell 0.1 percent after the U.S. gauge lost 0.3 percent. The Bloomberg Dollar Spot Index was little changed and New Zealand’s dollar was set for its worst quarter since 2008. Oil in New York slipped 0.2 percent.

Global stocks dropped for the first quarter in more than a year and sovereign bonds are beating corporate debt by the most since 2011 as speculation about Federal Reserve interest-rate increases and geopolitical tensions spur risk aversion. Leaders of Hong Kong’s protests set an Oct. 1 deadline for their demands to be met. With mainland markets poised to close for a weeklong national holiday, a China purchasing managers’ index from HSBC Holdings Pls and Markit Economics showed a slower-than-estimated expansion this month.

Bloomberg

Monday, September 29, 2014

RBA to Tackle Australian Housing Market with Lawmakers

Top officials from Australia’s central bank will appear before lawmakers on Thursday to answer questions on the housing market, just as data shows lending for investment growing at its fastest pace in over six years.

The Reserve Bank of Australia (RBA) last week surprised many by saying it was considering tougher rules on lending for housing investment given rapid loan growth and rising home prices.  That led Senators to invite the central bank to a hastily-arranged committee meeting to discuss the new measures with an eye to making sure they would not harm housing affordability or the supply of new homes.

Attending will be RBA Assistant Governor Malcolm Edey, who looks after the financial system as a whole, and Luci Ellis the head of its financial stability unit. The meeting starts at 8.30 a.m. on Thursday, or 2230 GMT on Wednesday.  The central bank last week warned that record low rates and intense competition among banks have fuelled growth in lending for investor housing that was making the market “unbalanced”.

Reuters

China’s HSBC PMI at 50.2 Indicate Risks Remain

China’s vast factory sector showed signs of steadying in September as export orders climbed, a private survey showed on Tuesday, easing fears of a hard landing but pointing to a still-sluggish economy facing considerable risks.

The final HSBC/Markit Manufacturing Purchasing Managers’ Index(PMI) hovered at 50.2 in September, unchanged from the August reading which was a three-month low, but lower than a preliminary reading of 50.5.

A sub-index measuring new export orders, a gauge of external demand, expanded to a 4-1/2-year-high of 54.5, though domestic demand appeared soft. The 50 mark separates expansion from contraction in activity on a monthly basis.

Reuters

Asian Markets Cautious with Eyes on HK Unrest

Asian markets were in hesitant mood on Tuesday as investors wondered what China’s response would be to civil unrest in Hong Kong, while the U.S. dollar was on track to post its biggest monthly gain in well over a year.

Tens of thousands of pro-democracy protesters blocked Hong Kong streets on Tuesday, in one of the biggest political challenges to Beijing since the Tiananmen Square crackdown 25 years ago.  The unrest was an added complication for investors amid long-standing concerns about the health of China’s economy.

An HSBC survey of manufacturing (PMI) for September disappointed slightly by showing a final reading of 50.2, steady on August but down from its preliminary 50.5.  One bright spot was a measure of new export orders which climbed to a 4-1/2-year-high of 54.5.

Reuters

Japan’s Economy Takes Another Hit

Annual household spending in Japan fell for a fifth straight month in August and factory output unexpectedly declined, highlighting the challenges policymakers face to revive an economy reeling under the strain of a sales tax hike.

The one bright spot came in data showing the jobless rate fell in August, while the availability of jobs stayed at a 22-year high, suggesting that improvements in the job market will ease some of the pain on households.

Still, it’s unlikely to be sufficient on its own to underwrite a solid rebound in the economy, especially as exports also continue to underperform.  Internal affairs ministry data showed household spending fell 4.7 percent in August from a year earlier, weaker than a 3.8 percent drop forecast in a Reuters poll, as an April 1 sales tax hike to 8 percent from 5 percent continued to take its toll.

Reuters

U.S. Consumer Spending Climbs as Job Gains Boost Wages

Consumer spending rebounded in August as employment gains revived household earnings growth and encouraged Americans to return to shops and car dealerships.

The 0.5 percent increase in purchases was more than forecast and followed little change in July, Commerce Department figures showed today in Washington. Incomes (PITLCHNG) advanced, rising 0.3 percent last month as wages and salaries climbed the most in three months.

Worker pay over the past 12 months is showing its biggest gains since the end of 2012, raising the odds for improving sales at companies such as Hooker Furniture Corp. The pickup in spending that accounts for almost 70 percent of the economy will help put the expansion on firmer footing as the housing market shows signs of fatigue.

Bloomberg

Gold Headed for Poor Quarter

Gold traded near the lowest level in nine months, on course for the first quarterly loss this year, as prospects for higher U.S. borrowing costs boosted the dollar to its best quarter since the financial crisis.

Bullion for immediate delivery traded at $1,217.14 an ounce by 9:22 a.m. in Singapore from $1,215.81 yesterday, according to Bloomberg generic pricing. The metal has declined 8.3 percent since the end of June, dropping on Sept. 25 to $1,207.04, the lowest level since Jan. 2 and within 0.5 percent of erasing this year’s gains that were partly fueled by tensions in Ukraine and the Middle East.

Gold sank 28 percent in 2013 on expectations the Federal Reserve will reduce asset purchases as the economy improves. The Bloomberg Dollar Spot Index has risen 6.6 percent this quarter, the most since the three months to Sept. 2008. Fed policy makers have raised U.S. interest-rate forecasts, while central banks from Europe to Japan and China maintained or expanded monetary stimulus to spur their economies.

Bloomberg

Japan Retail Sales Rise as Output Unexpectedly Slumps

Japan’s output unexpectedly fell while stronger retail sales and an improving job market showed resilience in the world’s third-biggest economy as Prime Minister Shinzo Abe weighs another sales-tax increase.

Industrial production declined 1.5 percent in August from July, compared with the median estimate of 31 economists surveyed by Bloomberg News for a 0.2 percent gain. Retail sales increased 1.9 percent from the previous month, as the jobless rate slid to 3.5 percent.

The data underscore headwinds for manufacturers as the yen trading near a six-year low fails to boost output, even as domestic demand crawls back after a blow from April’s tax hike. Abe’s government has signaled it is prepared to boost stimulus to help consumers and businesses weather any further increase in the levy next year.

Bloomberg

Yuan to Start Direct Trading With Euro

China will start direct trading between the yuan and the euro tomorrow as the world’s second-largest economy seeks to spur global use of its currency.

The move will lower transaction costs and so make yuan and euros more attractive to conduct bilateral trade and investment, the People’s Bank of China said today in a statement on its website. HSBC Holdings Plc said separately it has received regulatory approval to be one of the first market makers when trading begins in China’s domestic market.

The euro will become the sixth major currency to be exchangeable directly for yuan in Shanghai, joining the U.S., Australian and New Zealand dollars, the British pound and the Japanese yen. The yuan ranked seventh for global payments in August and more than one-third of the world’s financial institutions have used it for transfers to China and Hong Kong, the Society for Worldwide International Financial Telecommunications said last week.

Bloomberg

U.S. Dollar Climbs Versus EM Currencies

The dollar climbed to a six-month high against emerging-market currencies as signals the U.S. economy is improving bolstered the case for the Federal Reserve to raise interest rates for the first time since 2006.

Currencies of developing countries fell for a third day and volatility rose as unrest in Hong Kong damped risk appetite. Brazil’s real touched the weakest in almost six years after a poll showed President Dilma Rousseff widened her lead over opposition candidate Marina Silva. The U.S. dollar headed for its biggest monthly gain since 2012, while New Zealand’s currency reached a 13-month low.

“Developments in Hong Kong have definitely caught the market’s attention; it’s helping drive the risk-off sentiment,” said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, in a phone interview. “The dollar’s strength is starting to endanger some of the commodity currencies that have done quite well in the quantitative-easing environment.”

Bloomberg

Corn Rallies to $3.20 on Midwest Rain

Corn futures rebounded from a five-year low and soybeans climbed from the cheapest since 2010 on speculation that rain in the Midwest will delay the harvest in the U.S., the world’s biggest grower of the crops.

By midweek, showers will travel east across the Corn Belt, ending Oct. 4, Commodity Weather Group said in a report. Dry weather is expected six to 10 days from today, followed by more rain, the Bethesda, Maryland-based company said. Prices have tumbled this year on the government’s outlook for the largest crops ever.

“The forecast brings more moisture into the Midwest than seen on Friday, which would bring a slowdown in harvest for a few days,” Greg Grow, the director of agribusiness at Archer Financial Service Inc. in Chicago, said in a telephone interview.

Bloomberg

Gold Steady at $1218 as Global Equities Drop

Gold futures rose as a drop in global equities boosted demand for the precious metal as an alternative investment.

Shares fell as tens of thousands of protesters took the streets in Hong Kong, pressing for free and open elections. Gold has slumped 5.3 percent in September, on pace for its biggest monthly loss this year, amid a rally to record for U.S. stocks and as the dollar climbed to the highest since 2010 against a basket of 10 currencies.

The metal is moving closer to erasing its 2014 advance amid low inflation and bets that the U.S. recovery will prompt the Federal Reserve to boost interest rates. While bullion reached this year’s peak in March as political tensions escalated in Ukraine, the demonstrations in Hong Kong aren’t “enough to turn the market” from its bearish trend, said Jordan Kotick, the head of cross-asset strategy at RBC Capital Markets in Toronto.

Bloomberg

UK Consumers Face Three More Years of Squeezed Spending

British consumers face another three years of squeezed spending, an influential report suggests, amounting to a “lost decade” for households.

Annual wage growth is likely to remain well below the 4.5%-to-5% rises seen before the financial crisis struck in 2008, the EY Item Club survey says.

This will slow consumer spending growth over the next two years.

Median pay in real-terms is forecast to fall from 18,852 in 2008 to 17,827 by 2017, the survey suggests.

The Item club, a non-governmental forecaster that uses HM Treasury’s model of the UK economy, believes that record numbers of people in work – currently 30.6 million – will act as a brake on wage rises.

The report expects the pace of consumer spending growth to be 2% over the next two years, compared to the annual average growth rate of 3.7% during the pre-crisis decade.

“Total household incomes have strengthened because more people are in work, but individuals do not have extra money in their pockets,” said Martin Beck, the EY Item Club’s senior economic adviser.

“Real wages are being held back by strong growth in the supply of workers and the fact that firms are facing increased non-wage costs, such as new pension schemes,” he added.

Mr Beck believes the so-called “squeezed middle” – households containing neither highly-skilled nor low paid workers – will continue to see limited growth in disposable income as pay rises remain below the rate of inflation – currently 1.5% – and competition for jobs remains strong.

via BBC

India’s PM Modi is Committed to Liberalizing the Country’s Economy

Indian Prime Minister Narendra Modi told nearly a dozen U.S. company chiefs on Monday that he is committed to liberalizing his country’s economy, which has underperformed other emerging markets recently after years of breakneck growth.

Modi spoke at a breakfast with 11 chief executive officers during his first U.S. visit since coming came to power in May, vowing to get India’s economy back on track.  The prime minister was headed to Washington for a private working dinner with President Barack Obama on the fourth day of the visit. Modi, however, is fasting.

Among those attending the breakfast at the New York Palace Hotel were the CEOs of Caterpillar and Boeing Co.  “He wasn’t at all like the politicians we’re used to here,” said Caterpillar Chairman and CEO Doug Oberhelman, who shared his impressions of the breakfast meeting with Reuters.

CNBC

Gold Steady Around $1217 as U.S. Dollar Lower

Gold settled modestly higher on Monday, but the metal’s gains were capped as the dollar seesawed between negative an positive territory.  U.S. gold futures finished the session $3.40 higher at $1,219.80 an ounce.  Spot gold was last down 0.2 percent to $1,217 an ounce. Cash prices had reached a nine-month low of $1,206.85 on Thursday, before recovering slightly.

The dollar was unchanged against a basket of major currencies and still close to a four-year peak hit earlier in the day as the market looked ahead to a series of important economic data, culminating in the release on Friday of U.S. September non-farm payrolls.

The bigger impact on gold prices could still come from U.S. data as market players seek to gauge the strength of the economy and its impact on Federal Reserve policy.

CNBC

West TX Oil Around $95 on Encouraging U.S. Data

U.S. crude oil rose on Monday, hovering around $94 a barrel on support from strong U.S. economic data last week, while Brent edged up after nearing a two-year low last week.

With U.S. refinery maintenance season around the corner, analysts said prices for U.S. crude, or West Texas Intermediate (WTI), may come under pressure. Gasoline prices have jumped around 6 percent in the last two weeks due to refinery maintenance shutdowns, and strength in gasoline has supported crude prices. Still, the contract jumped after data showed U.S. spending and income rose strongly last month.

“I think demand by U.S. refiners to make product to export is definitely supporting WTI prices,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. “Looking overseas, reports that Libya’s production has climbed back…means we don’t have supply disruptions.”

CNBC

Mixed Feelings About Australia’s Property

Australian policy makers have two housing markets to worry about, and it’s a toss up which carries the most risk.  One is too cold, the other too hot. One they can’t do anything about as it is in China, the other is a home grown headache the authorities are just starting to wrestle with.

How they unfold will have lasting ramifications for Australia’s economy and interest rates.  “There are two prices that matter for Australia right now, those for homes and those for commodities, said Paul Bloxham, chief economist for Australia at HSBC.

“Since the Chinese housing market is such a driver of demand for commodities, it matters just as much in the big picture as the domestic market,” he added.  The property sector accounts for about 15 percent of China’s economy and impact some 40 industries from furniture to steel, is of increasing concern to Beijing as it drags on growth.

CNBC

Fed’s Evans: ‘Quite some time’ Before Rates Should Rise

Chicago Fed President Charles Evans told CNBC on Monday he believes it would be “quite some time” before it’s appropriate to start increasing interest rates from their near-zero levels.

Evans sees June as a possibility for the first rate increase, but said on “Squawk Box if it were his decision, he’d wait even longer. “If you look at the risks, we ought to balance those and be concerned that sometimes coming out of zero … is really a difficult proposition for the economies. And so I’d like to be patient.”

Evans is one of the Fed’s dovish regional chiefs. While not a voting member on the central bank’s policymaking committee this year, he’s a 2014 alternate and will be voting next year.

CNBC

Odds On for Solid Fourth Quarter

Odds are that the stock market will have a pretty good fourth quarter, but it’s almost certain to be a volatile one.

The third quarter ends Tuesday, with the Nasdaq outperforming with a more than 2 percent gain, and the small-cap Russell 2000 lagging with a more than 6 percent loss. The Dow was up 1.4 percent for the quarter, and the S&P 500 was up about 1 percent.

Monday’s market was rocky, with stocks losing more than a percent, before erasing the steepest losses. It is the eighth of 10 days, in which the Dow has had a triple-digit move in either direction. The Dow finished the day down 41 points at 17,071, and the S&P 500 was off 5 at 1,977.

CNBC

A Stronger U.S. Dollar Causes Concern

Expectations that the Federal Reserve is on course to start tightening policy has spurred fears of a return of last year’s emerging market turmoil, but Societe Generale tips a strong dollar as a bigger risk.  “A strong dollar tantrum could be a more worrying scenario than a Fed tightening tantrum,” Michala Marcussen, global head of economics at Societe Generale, said in a note dated Sunday.

The U.S. dollar index has climbed around 7 percent this year, with the Fed now nearly completing the tapering of its asset purchases, with markets widely expecting interest rate increases to begin sometime next year.  Some analysts are concerned this will spur a repeat of the “taper tantrum,” when concerns about the Fed’s move to begin tapering caused a brutal selloff in emerging market assets earlier this year and last year.

“Hope today is that a strong dollar will cap U.S. inflation, delay Fed tightening and boost exports to the U.S.,” Marcussen noted, but she believes for that to happen, the U.S. dollar would need to strengthen so much that it would signal much weaker growth in the rest of the world.

CNBC

Japan Tax Hike Still Causing Issues for Economy

Japan’s retail sales rose 1.2 percent on year in August, above expectations for a 0.3 percent rise in a Reuters poll and up from a 0.6 percent rise in July, data showed on Tuesday.

However, household spending fell 4.7 percent on year, worse than expectations for a 3.8 percent decline, while industrial production fell 1.5 percent on month, below expectations for a 0.2 percent rise.

The data paint a mixed picture of Japan’s economy and suggest that it has not fully adjusted to the April sales tax hike.  “Obviously we’re still dealing with the effects of the tax in April. The third arrow was going to be difficult we know,” said Martin Schulz, managing director of international equities at PNC Capital Advisors.

CNBC

Gold – Support Level at $1215 Remains Firm

Gold for Tuesday, September 30, 2014

For more than a week now Gold has thoroughly enjoyed solid support at $1215 after falling strongly a couple of weeks ago from $1240 to just below $1215.  The next obvious level of potential support remains at $1200 which is a long term key level. If gold was to fail at this level, then it is likely the flood gates will open and the shine will have definitely worn off. Several weeks ago Gold was enjoying a resurgence as it moved strongly higher off the support level at $1275, however it then ran into resistance at $1290. In the week prior, Gold had been falling lower back towards the medium term support level at $1290 however to finish out last week it fell sharply down to the previous key level at $1275. Over the last month or so the $1290 level has shown some signs of support and held gold up until its recent sharp decline. During the second half of June, gold steadily moved higher but showed numerous incidents of indecision with its multiple doji candlestick patterns on the daily chart. This happened around $1320 and $1330.

The OANDA long position ratio for Gold has steadied around 70% as gold finds solid support around $1215. At the beginning of June, gold did very well to repair some damage and return to the key $1275 level, then it has continued the momentum pushing a higher to its recent four month high. After moving so little for an extended period, gold dropped sharply back in May from above the well established support level at $1275 as it completely shattered this level falling to a four month low around $1240. It remained around support at $1240 for several days before its strong rally higher. It pushed down towards $1280 before sling shotting back and also had an excursion above $1300 for a short period before moving quickly back to the $1293 area again. Over the last few weeks gold has eased back from around $1315 to establish its recent narrow trading range below $1295 before its recent slump.

Way back since March, the $1275 level has established itself as a level of support and on several occasions has propped up the price of gold after reasonable falls. Throughout the second half of March gold fell heavily from resistance around $1400 back down to a several week low near support at $1275. Both these levels remain relevant as $1275 continues to offer support and the $1400 level is likely to play a role again should gold move up higher. Through the first couple of months of this year, gold moved very well from a longer term support level around $1200 up towards a six month higher near $1400 before returning to its present trading levels closer to $1300.

Gold settled modestly higher on Monday, but the metal’s gains were capped as the dollar seesawed between negative an positive territory.  U.S. gold futures finished the session $3.40 higher at $1,219.80 an ounce.  Spot gold was last down 0.2 percent to $1,217 an ounce. Cash prices had reached a nine-month low of $1,206.85 on Thursday, before recovering slightly.  The dollar was unchanged against a basket of major currencies and still close to a four-year peak hit earlier in the day as the market looked ahead to a series of important economic data, culminating in the release on Friday of U.S. September non-farm payrolls.  The bigger impact on gold prices could still come from U.S. data as market players seek to gauge the strength of the economy and its impact on Federal Reserve policy.  Strong economic data could prompt the U.S. central bank to raise interest rates faster and sooner than expected, which could boost the dollar and hurt non-interest-bearing bullion.

(Daily chart / 4 hourly chart below)

g_20140930g_20140930_4hour

Gold September 30 at 00:40 GMT   1216.1   H: 1223.3   L: 1214.9

Gold Technical

S3

S2

S1

R1

R2

R3

1215

1200

—

1240

1290

—

During the early hours of the Asian trading session on Tuesday, Gold is remaining quite steady right above the support level at $1215 after finishing last week falling sharply back down towards the support at $1215. Current range: trading right around $1216.

Further levels in both directions:

• Below: 1215 and 1200.

• Above: 1240 and 1290.

OANDA’s Open Position Ratios

g_20140930_ratio

(Shows the ratio of long vs. short positions held for Gold among all OANDA clients. The left percentage (blue) shows long positions; the right percentage (orange) shows short positions.)

The long position ratio for Gold has steadied around 70% as gold finds solid support around $1215. The trader sentiment is strongly in favour of long positions.

Economic Releases

23:30 (Mon) AU AIG Manufacturing PMI (Sep)

23:50 (Mon) JP Tankan (Q3)

00:00 NZ NBNZ Business Confidence (Sep)

01:30 AU Private Sector Credit (Aug)

03:00 NZ Monetary Aggregates M3 (Aug)

05:00 JP Construction orders (Aug)

05:00 JP Housing starts (Aug)

08:30 UK Current Account (Q2)

08:30 UK GDP (3rd Est.) (Q2)

08:30 UK Index of Services (Jul)

09:00 EU Flash HICP – Core (Sep)

09:00 EU HICP

09:00 EU Unemployment (Aug)

12:30 CA GDP (Jul)

12:30 CA Industrial product price index (Aug)

12:30 CA Raw Materials Price Index (Aug)

13:00 US S&P Case-Shiller Home Price (Jul)

13:45 US Chicago PMI (Sep)

14:00 US Consumer Confidence (Sep)

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Asian Equities Lower on Hong Kong Protests

Asian equities declined on Tuesday amid caution over developments in Hong Kong and as investors focused on key data in China and Japan.  Protesters remained on Hong Kong’s streets on Tuesday, spreading to areas of Admiralty, Causeway Bay and Mong Kok in Kowloon, but police have been absent, according to local media.

“The region’s second largest index will again be the focal point for Asian markets, as Hong Kong sees its largest civil unrest since the 60s. With Chinese National Day (a public holiday) tomorrow, the likelihood of the crowds increasing is mounting,” said Evan Lucas, market strategist at IG.

On the economic front, Japan’s August data deluge was mixed with household spending and industrial output coming in worse than expected, while retail sales beat forecasts. Next up is HSBC’s China final factory activity report for September at 9:45am SIN/HK.

CNBC

U.S. Dollar Poised for Super September

The dollar hovered at a four-year peak against a basket of major currencies early on Tuesday, on track to post its biggest monthly gain in well over a year even as some analysts warned its three-month long rally was at risk of running out of puff.

Trading in Asia is likely to be subdued with investors keeping a wary eye on the spreading pro-democracy protests in Hong Kong and with a raft of holidays in the region this week.

The dollar index last stood at 85.605, not far from an overnight peak of 85.798 – a high not seen since July 2010. It’s monthly gain of 3.5 percent, if sustained, would be the largest since February 2013.  In the past three months, the dollar index has surged more than 7 percent, driven in part by expectations the Federal Reserve will start to hike interest rates well ahead of most other major central banks.

CNBC

Australia 200 – Drops Sharply to Seven Month Low Below 5250

Australia 200 for Tuesday, September 30, 2014

For all of September the Australia 200 Index has declined strongly from its multi-year high after running into resistance around 5650 back to enter its previously established trading range between 5400 and 5500, before falling further. A couple of weeks ago the 5400 level was called upon to offer support as the index desperately tried to stay in touch with its range, however it fell through there before rallying strongly back up to 5400 early last week. It has now fallen sharply to a seven month low below 5250 and it hopes to stay in touch with the well established range between 5400 and 5500. Up until recently, the 5400 level had done well and propped up price to keep it within the range. For most of this year when the index has fallen to the 5400 level, it has bottomed out at around 5370 so it will be interesting to see whether this happens again now. All of this was preceded by a solid move higher bouncing strongly off the support level at 5400. Just prior to the surge it fell sharply over a couple of weeks returning back to more familiar territory between the 5400 and 5500 levels.

In its recent fall at the beginning of August it moved down to a three week low around 5375, however it received solid support at the 5400 level which has allowed to consolidate and rally higher. The solid move higher throughout July saw it move strongly up through both the 5500 and 5550 levels to reach a then six year high around 5620. In recent weeks it has discovered a new key level to deal with after running into a short term resistance level at 5550, which earlier last week provided some solid support. It reversed strongly several weeks ago bringing it back down to almost touch the 5400 level before rallying back higher again. At the beginning of June the Australian 200 Index fell and broke back down through the key 5500 level towards a four week low around 5400 before consolidating and resting on support there for an extended period.

The 5400 and 5500 levels have firmly established themselves as significant and any substantial break to either side will most likely be a significant move and be closely monitored. It is quite likely many are sitting on the sidelines waiting for the break before committing as they continue to watch the index move between these two levels. Back at the end of May, it moved back and forth between the two key levels of 5500 and 5550 before the recent fall. Over the last couple of months the Australia 200 Index has formed an amazing attraction to the key 5500 level as it spent a considerable amount of time trading around it. A couple of weeks ago, the index fell away heavily back down to support around 5400 before returning to the key 5500 level just as quickly, as if gravity had pulled it back. The index has done very well over the last couple of years moving from below 4000 to its present trading levels around 5500.

Australian house prices flattened in September after the strongest winter gains in seven years.  A daily home value index for mainland state capitals compiled by RP Data and CoreLogic was down 0.3 per cent in the first 26 days of September, compared with the average for all of August.  But the trend picked up late in the month, making a “relatively flat” result likely for the month as whole, RP Data research director Tim Lawless said.  “The first month of spring has seen housing market conditions remain buoyant with clearance rates consistently above the 70 per cent mark on a weighted capital city basis and agents continuing to report strong housing market activity,” he said.  “From a valuations perspective we have seen a flattening in the rate of capital gains over the month of September.”  The September result would bring the three-monthly growth rate for prices back to about 2.5 per cent, a “healthy reduction” from growth of 4.2 per cent over the three months to August, Mr Lawless said.   “With the debate around sustainability of dwelling values heating up, the softer September result should be viewed as a welcome evolution in the housing market, although it remains to be seen whether these softer conditions will persist throughout the rest of Spring.”  The final figures for September, which will include data for smaller capitals and regional areas, are due for release on Wednesday.

(Daily chart below)

asx_20140930

Australia 200 September 30 at 00:30 GMT   5253   H: 5253   L: 5253

Australia 200 Technical

S3

S2

S1

R1

R2

R3

5200

—

—

5500

5650

—

During the hours of the Asian trading session on Tuesday, the Australia 200 Index will be trying to rally higher after falling sharply to below 5250. For most of this year the Australia 200 Index has moved well from the lower support level at 5000 up to the multi-year highs above 5500 in the last month or so.

Further levels in both directions:

• Below: 5200.

• Above: 5500 and 5650.

Economic Releases

23:30 (Mon) AU AIG Manufacturing PMI (Sep)

23:50 (Mon) JP Tankan (Q3)

00:00 NZ NBNZ Business Confidence (Sep)

01:30 AU Private Sector Credit (Aug)

03:00 NZ Monetary Aggregates M3 (Aug)

05:00 JP Construction orders (Aug)

05:00 JP Housing starts (Aug)

08:30 UK Current Account (Q2)

08:30 UK GDP (3rd Est.) (Q2)

08:30 UK Index of Services (Jul)

09:00 EU Flash HICP – Core (Sep)

09:00 EU HICP

09:00 EU Unemployment (Aug)

12:30 CA GDP (Jul)

12:30 CA Industrial product price index (Aug)

12:30 CA Raw Materials Price Index (Aug)

13:00 US S&P Case-Shiller Home Price (Jul)

13:45 US Chicago PMI (Sep)

14:00 US Consumer Confidence (Sep)

* All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

UK Manufacturers Against Brexit

British consumers face another three years of squeezed spending, an influential report suggests, amounting to a “lost decade” for households.

Annual wage growth is likely to remain well below the 4.5%-to-5% rises seen before the financial crisis struck in 2008, the EY Item Club survey says.

This will slow consumer spending growth over the next two years.

Median pay in real-terms is forecast to fall from 18,852 in 2008 to 17,827 by 2017, the survey suggests.

The Item club, a non-governmental forecaster that uses HM Treasury’s model of the UK economy, believes that record numbers of people in work – currently 30.6 million – will act as a brake on wage rises.

The report expects the pace of consumer spending growth to be 2% over the next two years, compared to the annual average growth rate of 3.7% during the pre-crisis decade.

“Total household incomes have strengthened because more people are in work, but individuals do not have extra money in their pockets,” said Martin Beck, the EY Item Club’s senior economic adviser.

“Real wages are being held back by strong growth in the supply of workers and the fact that firms are facing increased non-wage costs, such as new pension schemes,” he added.

Mr Beck believes the so-called “squeezed middle” – households containing neither highly-skilled nor low paid workers – will continue to see limited growth in disposable income as pay rises remain below the rate of inflation – currently 1.5% – and competition for jobs remains strong.

via BBC

The ECB Will Spell Out Deflation Avoidance Plan

On one side of the Atlantic they’re trying to refill the punchbowl. On the other they’re getting ready to take it away. This week, investors may get a clearer idea why.

The European Central Bank will spell out on Thursday its latest attempt to steer the euro zone away from the prospect of damaging deflation, following the latest snapshot of consumer price pressures on Tuesday.

U.S. jobs numbers on Friday will probably confirm that the fast-recovering American economy has reached the point where the Federal Reserve can finally halt its massive bond-buying stimulus.

The contrast between the U.S. and euro zone economies has grown increasingly stark, adding to the pressure on the ECB and European leaders to revive growth in their corner of the world.

via CNBC