The dollar dominates as AUD succumbs

The Asian session has seen the ‘buy dollars, wear diamonds’ theme continue despite long USD positioning reaching extreme levels. Investors show no signs of reducing risk ahead of the ECB meeting tomorrow and US jobs report on Friday. USD/JPY broke above 110 to reach a high of 110.09, a level not seen since August 2008. Japan’s Q3 Tankan survey showed a mixed picture as the large manufacturing index beat expectations of 10 coming in at 13, and the non-manufacturing component falling below consensus at 13 versus the forecast of 17.

The AUD succumbed to further pressure despite the better China manufacturing PMI data which came in at 51.1 and above expectations. The lifestyle took its lead from disappointing domestic data in the form of retail sales that came in at 0.1% versus the expectation of 0.4%. The AUD collapsed through the 0.8700 level, although the 2014 low of 0.8660 remains unbroken for the moment.

The struggling euro will take its lead from PMI data following CPI data released yesterday hitting the lowest levels in five years ahead of the ECB meeting tomorrow. All the focus will be on ECB President Mario Draghi, and his subsequent press conference, and how he will communicate the strategy to increase the ECB’s balance sheet. The FT reports that he could suggest the Central Bank are willing to buy Greek and Cypriot bank loans with a junk rating, which will no doubt please the Germans no end!

The US data calendar this afternoon will give us our NFP preview as the ADP survey will be released along with ISM manufacturing, Markit manufacturing PMI, construction spending and further housing data in the form of new mortgage applications.

EUR/USD

Supports 1.2570-1.2550-1.2500  | Resistance 1.2665-1.2685-1.2715

USD/JPY

Supports 109.50-109.10-108.70    | Resistance 110.10-110.35-110.80

GBP/USD

Supports 1.6160-1.6100-1.6060  | Resistance 1.6240-1.6280-1.6340