It was all about stock market volatility in the NY session as a rout is US equities sent JPY crosses into the basement. US stocks ended the day -4% lower and this was a relief given that the Dow had plunged a whopping -800 points - or nearly -8% - at one point. As such JPY crosses bore the brunt of the impact. USD/JPY fell as much as -300 pips in NY trading to a low near 100.22 before closing near the 101.80 mark. EUR/JPY meanwhile plummeted more than -550 pips to a session low near 135.00 before rebounding into a 137.40/45 close.
One of the bigger movers in the session was AUD/JPY. This pair was hit by a double-whammy of falling commodity prices and declining stocks. The commodity index slipped -5% on the day and this put tremendous pressure on Aussie. This coupled with the sharp leg-down in stocks saw AUD/JPY shed a monstrous -700 pips to a session low near 70.30/20 before climbing all the way back to close near the 73.50 mark. The next key resistance level for the pair lurks near 74.60 which is a 38.2% Fibonacci retracement of today's move into the lows.
Speaking of commodities, oil took it on the chin once again as the deteriorating global economic outlook puts a damper on energy demand. Oil closed the session down -$2.50 near $89 after making a low around the $87.50 mark. USD/CAD rocketed higher on lower oil prices as this puts pressure on Canada's economy. Loonie jumped about 250 points to a session high near 1.1085/90 before closing the day around the 109.90/95 zone.
Through all of this, EUR/USD was about -120 pips lower into the 1.3495/1.3500 area. The problems in Europe are ostensibly catching up to those in the US. Furthermore, the US's willingness to get ahead of the curve (TARP) likely puts it in a better position to recover sooner. The next hurdle for the buck looks to be Bernanke tomorrow. If he signals that the Fed is willing and able to cut rates we would expect to see some USD selling. This would eventually reverse if coordinated rate cuts from central banks across the pond follow.
Upcoming Economic Data Releases (Asia Session) Prior Estimate
10/6/2008 22:30 GMT AU AiG Perf of Construction Index SEP 43.1 - -
10/6/2008 23:01 GMT UK NIESR GDP Estimate SEP -0.20% - -
10/7/2008 JN BOJ Target Rate 7-Oct 0.50% 0.50%
10/7/2008 3:30 GMT AU RBA CASH TARGET 8-Oct 7.00% 6.50%
10/7/2008 5:00 GMT JN Leading Index CI AUG P 91.4 89.2
10/7/2008 5:00 GMT JN Coincident Index CI AUG P 103.5 100.7
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