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Aussie/Japanese Yen the Pair to Watch for Commodity/China Growth Today

10/22/2018 10:52 am EST

Focus: FOREX

Robert Savage

Partner & CEO, CCTrack Solutions

For those trading on a quiet Monday, the Aussie/Japanese yen (AUD/JPY) may be the currency pair to watch, writes Bob Savage Monday. Bob is presenting at Crypto Intelligence TradersExpo Las Vegas Nov. 14.

The return on capital matters more than return of capital today. Celebrations around Italian debt downgrades being less painful (in other words not junk status) that is the first driver, joy over China re-leveraging the other as shares there jump the most in 3-years up over 4%.

The news isn’t all easy, however, as Australian dollar (AUD) slips back to near the yearly lows on politics as PM Morrison looks likely to lose his parliamentary majority post the Wentworth by-election.
In the UK, the British pound (GBP) is lower as PM May faces a full rebellion of pro-Brexit Tories with euro/pound (EUR/GPB) watching the 200-day at .8835.

The data was sparse overnight but important to consider as the Japan FSR highlights real estate risks, as China house prices jump again, as the Bundesbank downplays the auto sector 3Q pullback and as the EU shows primary budget surpluses in 2017 everywhere but the periphery (and with Germany beating Greece in the surplus game).

This isn’t the stuff that sparks growth, putting ECB policy decisions as central for the forecast and for the week ahead.

The EUR bounce up into the EU open stalls with BTPs finding a limit to the joy of not being junk. The risk moods are tempered by the geopolitical clouds from the U.S./Russia nuclear treaty unwind and the ongoing Saudi/Khashoggi crisis, but the overarching driver for risk remains 3Q earnings and that brings 158 companies in the S&P 500 (SPX) this week.

For those trading on a quiet Monday, the Aussie/Japanese yen (AUD/JPY) may be the currency pair to watch as it captures the commodity/China growth hopes along with carry trade support against the fear about debt and politics. Watch 79 for risk downshifts and 82 for clear signals of a bigger rally.

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