OANDA - FX Market Commentary

News   •   Nov 23, 2016 23:52 +08

Please attribute the following commentary to Stephen Innes, senior trader at OANDA. For direct comment, call Stephen at +65 9176 1384 or email sinnes@oanda.com.

Australian Dollar

The Australian Jobs data was on the soft side. While the full-time number was boisterous, the participation rate was lower, and dealers are focusing on last month's revision.

The Aussie has been under pressure due to rising US Bond yields and the jittery regional EM markets. However, it took little more than a reversal off recent highs on commodity prices to set the wheels in motion for a probe below .7500.

The iron ore markets were hammered as Mainland exchanges added margin controls on selected clients after breaching exchange trading rules as the regulators continue to kerb excessive speculation.

The implication is not insignificant as iron ore as the industrial metal was providing a tentative support for the Aussie as US yields rocket. Higher yields and US dollar remains very much in favor with investors.

With commodity prices under the gun, we should expect the Aussie to remain offered as the currency prices for serious catch up with the G-3 Block. The .7500 was a very significant tipping point, and we may see losses accelerate lower over the next few days, if pressure remains on industrial commodities.

Also, there was a definite focus on RBA Lowe's comments suggesting the significant tail risk from a "pullback in international free trade" as the market in my view is now looking for any reason to short AUD as a proxy for regional APAC trade barrier implications.

Japanese Yen

As we enter the predictable consolidation phase of the current USD ramp, the focus will shift to Dr Yellen’s testimony to Congress and the Q&A which will follow her prepared delivery. With the S&P under pressure overnight on profit taking, the USDJPY lost some if it's risk appeal but remains firmly bid on tips within the current 108.50-109.50 ranges. US dollar demand remains intact with very few willing to aggressively step in front of the trend. The USDJPY is trading firm in early trade after the BoJ announced the First Fixed-Rate Operation to buy JGBs in the effort to keep longer dated yield in check supporting the BoJ resolve control the shape of the yield curve in the wake of the recent global bond markets.

Momentum is with the Dollar, and it's likely a matter of time, not if, the USDJPY challenges the important 110.00 level.