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  • Forex today was better placed on the Lira’s recovery.
  • However, there was a negative correlation today with the greenback falling within the day’s range of 96.6510-96.9840  while the CRB index made fresh lows below the neckline of the H&S at 186.73.
  • Commodities continue to bleed, along with equities, due to the contagion risk-off sentiment in global markets – although AUD and Kiwi stablised on demand from new long-term lows.  

TRY popped higher by about 7% but observers will note that attention has shifted more so to the underlying threat of a stronger dollar, a Fed intent on hiking interest rates and the rising debt levels denominated in the greenback while there is a miss match of offshore dollars to emerging market demand. In fact, while the Lira recovered, there was plenty of supply in the ZAR, RUB, BRL, MXN and CNH which is en route to the psychological 7.00 handle.  

For data, the retail “control group”, used for GDP calculations, was a firm 0.5%. The NY Fed Empire State manufacturing survey also made for some optimism by beating expectations – hitting its highest levels this year at 25.6, up from 22.6 in July.

The US 10yr was closing in on H&S neckline (2.81%) and fell from 2.90% to 2.84% as investors look for security and an exodus of global equities which weighed on the greenback in the US session. The US 2yr treasury yield also fell from 2.63% to 2.59%.  

Currency action

The euro was supported down at 1.13 the figure and was firmer on news that Qatar will invest in the Turkish economy which lifts TRY and sentiment in the EZ.  However, the banking sector in the EZ remains vulnerable and the ECB remains on red alert, pushing prospects of a rate hike further out and keeping a lid on rallies. However, there was a tighter spread between DE/US and this enabled the euro to stabilise.  EUR/USD settled in NY at 1.1345. The pound was showing no signs of a bottom and was down for the tenth day in a row, ending the North American session at 1.2690 and down by 0.25% within the range of 1.2723-1.2662 while US data for Q3 portrayed a solid growth picture. At the same time, the BoE is on hold for the foreseeable future which lends weight to the argument for further downside. This also leant support to the cross on Wednesday that rose +0.12% within NY’s 0.8935-0.8901 range, ending at 0.8935. The yen was firm into the 110 handle, with USD/JPY falling from 111.40 to as low as 110.43 with the yen outperforming the G10s while the DXY’s rally pauses for breath and Us yields fall on de-risking in EM-FX. The commodity complex was weighed heavily by a loss in industrial metals with copper dropping a significant 4%. WTI was also lower on surprise storage data and gold dropped around 3% – the fact that gold is not going up on events that would normally cause it to rise supports the outlook for the safe haven play in the dollar for longer. CNH is on the way to 7.00 and the Aussie set a new long-term trend low at 0.7202 yesterday while recovering to the 50-hr SMA up at 0.7241 on Wednesday, although contained on the CBR making fresh lows. The Kiwi also caught a bid from the lowest levels since February 2016 down at 0.6545 to 0.6565.

Key notes from US session  

Wall Street closes in a sea of red on mounting contagion fears

Key events in Asia today

When is the Australian jobs report, and how could it affect the AUD/USD?

Analysts at Westpac explained the key events for today as follows:

“Australia’s July labour force data is due at  11:30am  Syd/9:30am Sing/HK. June’s 51k surge in employment (41k full-time, 10k part-time) raises the danger of at least a statistical correction. The default median forecast is 15k or 20k, with Bloomberg reporting 15k for July. But such a high base in June has inspired a wide range of forecasts for July, from -22k to +30k. Westpac is looking for a softer reading, -5k. But with sample rotation hinting at a lower participation rate, we look for the unemployment rate to remain at 5.4%.”