Fx update_ usd weakness selective after friday_s disappointing data

After an all-around disappointing jobs report on Friday, the US dollar weakness has proven more selective, along the lines one would generally expect with the big rebound in risk appetite – as the riskier currencies surged against the G3, with the Japanese yen getting the worst of it. If this pattern continues, we should expect the EUR/risk and risk/JPY trades to provide the most beta to risk appetite – whether Friday’s attempted recovery extends here or is roundly rejected. It’s a busy

week ahead for central bank watchers, as we have no fewer than five central banks active in one way or another. First up is the Reserve Bank of Australia tonight, where the rhetoric has been relatively sanguine and neutral relative to the circumstances in China and in markets. Could the market get blindsided here by a dovish shift from the RBA? If the RBA continues to wax optimistic, the big trigger area in AUDUSD remains at 0.7250 if risk sentiment continues to improve and governor Glenn Stevens and company remain oddly complacent. But a dovish surprise would set up a bearish continuation argument on any daily close well below 0.7000 this week The rest of the week is peppered with interesting central bank meetings and minutes. The Bank of Japan is probably warming up for policy action and the Japan September Services PMI overnight was a disappointment on top of other recent weak data – but is this Wednesday’s too early?

Fx update_ usd weakness selective after friday_s disappointing data

Hard to tell, and governor Haruhiko Kuroda likes surprise above all else, so even if we get nothing, it doesn’t mean that the next BoJ meeting on the October 30 won’t see another “October surprise”. JPY: The comeback in USDJPY on Friday was impressive, given the very disappointing US jobs report. Further recovery in risk appetite is likely to make the JPY the weakest of the G10 this week, all things considered.

Still, it is hard to tell how much of the JPY weakness is based on worries that Kuroda will be pulling policy rabbits out of his hat this week. AUD: RBA dead ahead – RBA has been as “hawkish” as possible, given the ugly market developments not long prior to the last, Sep 1 meeting. While Stevens and company may continue with a hopeful, wait and see message, the ugly GDP print from Q3 and the nasty fall in current account of the last 12 months are a a potential red flag and the bigger risk is for an upgrade of the downside risks.

CAD: Strong risk on sees USDCAD sharply lower and things falling apart quickly for the bulls. Expecting high beta to risk appetite this week, though longer term CAD bears should sharpen their claws for the longer term if we realize a full pull consolidation back into the 1.2850-1.3000 zone. Canada elections on October 19 are a key event risk. Disclaimer The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor. com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.

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Fx update_ usd weakness selective after friday_s disappointing data