After a period of strong support, the Euro wavered overnight with price action making a convincing move below $US1.31-figure to lows of $US1.3055. Solid demand for Spanish debt at auction and further optimism over Spain’s near-term request for aid was overshadowed by moderate weakness across U.S equities, favoring a stronger U.S dollar across the board. Markets also reacted to signs of slowing in China with yesterday’s growth data showing GDP fell to annual pace of 7.4 percent in third-quarter.
Consolidative behavior seen across risk currencies was amplified by softer U.S equities which focused on corporate earnings and a rise in the weekly jobless claims. The number of U.S citizens filing for unemployment benefits rose to 388,000 for the week ending October 13. Economists had anticipated a more moderate rise to 360,000 from 342,000 the previous week. However, stronger than expected manufacturing data was a concession, with the Philly-Fed index returning to growth in October. The manufacturing gauge rose to 5.7 from a previous negative 1.9. The US leading index, which is a index of a broad range of indicators, pointed to stronger growth in the month of September. The Index rose 0.6 percent from a fall of 0.4 percent in August. Analysts expected the index to edge up by 0.2 percent. The DOW and S&P500 declined 0.06 and 0.24 percent respectively.
After peaking at three week highs of 104.12 US cents, the Aussie dollar consolidated yesterdays gains alongside risk counterpart. Support for the USD prompted weakness across the commodity bloc, but the Aussie dollar held up reasonably well in comparison to counterparts the CAD and Kiwi. The Loonie led the charge lower against the greenback with the USDCAD pair rising back above C$0.98. Speculation of further monetary easing in Japan also saw the Yen weaken across the board, with the USDJPY making a clean break to the upside of Y79 to near 1-month highs of Y79.47.
With little in the way of scheduled releases in the domestic session, we anticipate a quiet close to the week with regional equities likely to be the key directive. Market will then be look squarely on the events of European Summit which commences this evening. AUDUSD price action has displayed supportive tendencies at 103.55 US cents with further losses likely to be contained at 103.2 US cents during the domestic session. Resistance is likely to be maintained at overnight highs just above 104 US cents.