The IMF spooks risk

The Asian session has seen stocks trade under pressure adding further retracement to the dollar strength trend. The FX risk trade follows the crumbling equity markets as we head into the start of the US earning season, with Alcoa the traditional first big name to report this afternoon. The IMF has cut its outlook for global growth in 2015 from 4% to 3.8% as global tensions seem to be at the forefront of the fund’s thinking. The sharpest downgrades come from the Middle East and Russia as Japan also raises concern. A revision higher in the US growth outlook to 3.1% could not stop the rout on the dollar as the risk trade dominated global markets.

The AUD was again under pressure in the Asian session ahead of the Thursday’s jobs report. It followed an announcement that the Australian Bureau of Statistics will revise the July and August employment data by removing the usual seasonal factors, which shows concerns following very robust data for these months. The final nail in the lifestyles coffin was the HSBC Services PMI data that came in below expectations at 53.1 versus the August reading of 54.1.

The FX markets will take the direction from equity and oil markets ahead of the FOMC minutes. New York Fed President Dudley commented overnight that forecasts for a Federal Reserve interest rate hike in mid-2015 are ‘reasonable’. The market will be looking tonight for discussions around the decision to leave the ‘considerable time’ phase in the September statement, whilst the ‘dot plot’ pushed up hiking expectations.

EUR/USD

Supports 1.2625-1.2575-1.2500   | Resistance 1.2690-1.2715-1.2765

USD/JPY

Supports 107.75-107.50-107.15     | Resistance 108.55-109.20-110.10

GBP/USD

Supports 1.6030-1.6000-1.5940  | Resistance 1.6150-1.6200-1.6225