US Employment Report on Oct.22, Currencies Enter Steady Mode - 18.10.2013

The US dollar has been losing broadly against its major counterparties during yesterday session despite that a fiscal deal was concluded avoiding default. The greenback is under heavy selling pressure due to the short-term postpone of the political impasse since lawmakers would have to face it again early in 2014. US treasury yields reduced as the default risk removed, all the maturities from 1 month to 30 year have seen their yields falling on Thursday. Equities were on the upside with S&P 500 advancing by 0.67%, NASDAQ gaining 0.62%, Dow Jones was flat due to lower revenue for Goldman Sachs.

Main drivers of the FX market at the moment are the Non-Farm Payrolls and the coming meeting of the Federal Reserve. The US Labor Department opened yesterday after 2 weeks of closure and decided to announce the September employment report on October 22, Tuesday, the CPI on Oct.30 and October NFP on Nov.8 delaying it for one week. Additionally, the Fed is not likely to reduce its asset purchases in 2013 and with this political impasse going on the quantitative easing is likely to stay unchanged for a considerable time.

As investors were digesting the above mentioned drivers the US dollar index dropped sharply from 80.67 to support at 79.60, where downside was contained. We saw a short-term correction around that support and we would expect prices to attempt further lows although we are cautious ahead of NFP report, minimizing our risk/reward ratio.

US Dollar Index US Employment Report on Oct.22, Currencies Enter Steady Mode

The AUDUSD was well underpinned by greenback’s weakness as well as by that the Fed is not going to reduce asset purchases soon coupled by Chinese economy expanding in 3rd quarter by 2.2%, more than projected 2.1% and greater than previous quarter growth of 1.9%. The currency pair advanced as high as 0.9643 making a slight correction as traders were collecting profits. NFP and overbought indicators induce as no to bet further on the upside, instead we would expect sideways extension until Tuesday.