USD Gains as FOMC Minutes Surprise

The FOMC October 29-30th meeting minutes showed that members discussed about tapering to start in months ahead. Some continue seeing downside risks to US recovery, while others are willing to announce a timetable for the QE unwind. USD gained against a clear majority of G10 and EM currencies on revived specs that tapering will begin at some time in the foreseeable future. Released yesterday, the better-than-expected retail sales in October triggered a short-lived USD buybacks in New York, yet the flat-to-slower CPI readings rapidly capped enthusiasm. The CPI y/y retreated from 1.2% to 1.0% in October as expected, while the CPI m/m turned unexpectedly negative (-0.1% vs. 0.0% exp. & 0.2% last). Softer CPI gives margin to Fed in prolongation of the ultra-lose policy. This in hand, some FOMC members voiced that lower interest paid on excess reserves should be considered moving forward.

In Japan, the BoJ (Bank Of Japan) kept the monetary policy unchanged. November 15th MoF data showed that the foreign interest in Japanese stocks and bonds increased over the last week. The Nikkei stocks added 1.92%, JPY crosses remained well bid in Tokyo. USDJPY cleared offers pre-100.50 and rallied to 100.85. Next key option barriers are placed at 101.00/102.00. EURJPY eased to 134.11 (a stone's throw lower than our key support at 134.16 - fibo 38.2%) and recovered to 135.39 on broad based JPY sell-offs. Option bids trail above 135.00. Trend and momentum indicators remain comfortably positive. On the downside, we leave the first support at 134.02/134.16 (21 dma /fibo support).

EURUSD took a dive yesterday on rumors (by two people who declined to be identified) stating that ECB (European Central Bank) may consider a smaller-than-usual cut (minus 0.1%) to deposit facility rate if it decides to move it below zero. EURUSD extended losses to 1.3414 post-Fed minutes. Bids at the 1.3420-fibo support kept the downside limited in Asia. EURUSD heavily sold-off as Europe walked in. Technical indicators were hit by this sell-off. MACD indicator made a U-turn and returned into negative territories. The 21 dma prepares to cross the 50 dma on the downside. Offers are building pre-1.3480 and 1.3500.

In Australia, AUDUSD extended weakness to 0.9290 in Sydney. The weak Chinese HSBC manufacturing PMI in November helped on the downside. Light bids are seen at 0.9279 (100 dma) yet the bias is negative. Stops are reported below 0.9270.

Today, the focus is on Swiss October Trade Balance, Exports and Imports, Swiss October Money Supply M3 y/y, French and German November (Prelim) PMI Manufacturing and Services, Euro-Zone November (P) PMI Manufacturing, Services and Composite, Euro-Zone November (Prelim) Consumer Confidence, UK October Public Finances and Public Sector Borrowing, UK November CBI Trends Total Orders and Selling Prices, Us November 16th Initial Jobless Claims and November 9th Continuing Claims, US October PPI m/m & y/y, US November Philadelphia Fed Business Outlook.

By Ipek Ozkardeskaya | Swissquote Bank SA