Market Rumours

EUR/USD's failure to make gains above 1.4830 late last week was a disappointment says Barclays Capital, however the bank is reluctant to turn bearish. The proximity of weekly tenkan and trendline support at 1.4615 and 1.4675 and oversold momentum on the daily charts encourages the bank to stay bullish and its bias is that dips below 1.47 are a buy for a retest of the 1.5065 high, with a protective stop below 1.4580. EUR/USD now at 1.4767.

USD/JPY has traded back below its 26 DMA at 90.17 but the dollar is still not oversold and momentum is yet to turn bearish, so there's plenty of downside pressure left, says Mizuho Corporate Bank's Nicole Elliott. She adds that good futures volume on declining open interest suggests many are bailing out of positions and repeated tests of key supports between 89.00 and 87.00 are likely this month. Now at 90.21, Elliott favors shorts at market, adding at 90.50 with a stop above 91.65 looking for 89.25 and 88.50 on the downside.

One player buys 1-week USD-call/JPY-put option with strike price of 91.00 (vs spot last 90.11) at 15.25%, face value of $50 million, senior manager at non-Japanese brokerage says. Volatilities implied by 1-month ATM USD/JPY options rise to 13.00% from 12.85% Friday in NY, after spot falls in early morning trade to 89.18, lowest level since October 14, prompting slightly higher demand for USD downside hedges. But dealers say option prices may fall back in coming days if any stronger-than-expected U.S. economic data buoy long-term U.S. interest rates, pushing USD/JPY up.

China’s manufacturing sector grew last month at the fastest pace since April 2008, according to the country’s official purchasing managers’ index released on Sunday.
Analysts said the survey results confirmed that the country’s economic recovery was broadening as recovering export demand and consumption joined government stimulus as drivers of growth.

USD/JPY likely to react more to any negative surprises from U.S. data this week, while any strength in figures to lead to only limited gains, ahead of ISM manufacturing index for October later in global day, FOMC rate call Wednesday, says Barclays Capital in research report. After U.S. 3Q GDP last Thursday rose 3.5% at annual rate, beating expectations for 3.2% rise, says "the positive reaction to last week's 3Q GDP, which exceeded expectations, was limited." Amid slumping equities, says "overall the market remains more sensitive to bad data." Adds any boost to USD/JPY likely short-lived even if FOMC revises up its economic outlook Wednesday at end of two-day meeting, as likely to leave unchanged stated intent to maintain low rates for "extended period," due to high degree of economic uncertainty. USD/JPY last 89.90.

USD/JPY downside tipped after Treasury yields fell Friday in NY, shrinking long-term rate differential in JPY's favor; pair likely to trade in 89.00-90.00 range, says Yuji Saito, head of FX group at Societe Generale; pair last at 89.80. Says announcement of approval of CIT Group's prepackaged plan for bankruptcy also led to "risk avoidance" that earlier pushed pair down to 89.18. Says focus for rest of Asia trade on share market moves, with particular attention on Dow futures. On any further retreat in risk appetite, tips falls in risk-sensitive EUR; says support for EUR/JPY at 131.00 vs 132.11 last, for EUR/USD at 1.4600 vs 1.4735 last.