The NY session was lacking in news and economic events and it looked as if short-covering (taking profit on short positions) was the flavor. Risk went on an absolute rollercoaster and US equities would eventually falter into the close, settling -0.9% lower. EUR/JPY was tied close to the risk hip and the cross was taken for a ride from a NY open by 122.10 to a session high around 122.50 and back down towards 121.80 by the time the dust settled. EUR/USD, meanwhile, was well bid early on (good buying interest) and rocketed to a high near 1.3712 before collapsing to the 1.3650/40 lows as the close neared. Ostensibly the market failed to take out notable stop loss orders that had been lurking above the 1.3720 zone. We would expect the prior overnight lows around 1.3620 to attract now.
The commodity complex posted a major headfake. Gold (XAU/USD) had initially rallied into the highs just below the crucial $1075 zone but the level proved insurmountable and the precious metal would eventually follow the risk trade lower into the $1063 zone. This kept the so-called commodity currencies trading with an overall offered tone (good amount of selling interest). AUD/USD plunged from session highs just above 0.8700 to trade by 0.8630/40 as we write. USD/CAD was a one way ride up. The pair started out trading near 1.0680 and would end nearly 100 pips higher on the day. The meltdown in commodities coupled with credit rating concerns regarding a major Canadian bank spooked USD/CAD shorts.
The biggest piece of news now in Asia looks to be Japanese machine tool orders. While this is likely to have little fundamental impact on the yen, the overall tone to risk could move on a number that diverges significantly from last month’s 63.4% annual run-rate. Waning risk appetite should see the yen crosses follow lower.
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