The dollar saw robust buying during the APAC session on contagion fears related to the default of Chinese developer Evergrande. The company, which is saddled with over $300 bln in debt, is behind on payments of bank loans, as well as payments to suppliers and investors.
Dollar buying fell sharply during the European session. An upward correction got under way after North American markets opened. The euro recovered to 1.1740. The single currency drew support during the day from the EURGBP cross.
Today’s macro agenda (GMT 3)
- 15:30 US: housing starts and building permits (August), current account (Q2); Canada: new housing price index (August);
In Asian trading, major currencies have been moving in positive territory. The loonie and the aussie have seen fairly robust gains. At this point, buyers are showing some appetite for US index futures. The DXY index fell to 93.13.
Much still depends on news from Chinese developer Evergrande. The company needs to repay interest on $85 mln worth of bonds on September 23. Chinese markets are still closed today. Lack of response from the PBoC and Chinese authorities will keep the markets under pressure.
Risk sentiment remains extremely fragile. Dollar buying could resume at any time, since the US Federal Reserve will announce its decisions on interest rates and the QE program on Wednesday.
The 112-degree angle of the Gann fan kept the key pair above the 1.1700 handle. Price action recovered to 1.1737 at the close of the North American session, and to 1.1740 during today’s Asian session. Selling impetus has subsided after yesterday’s rout, but buyers are still treading cautiously ahead of the Fed’s upcoming meeting.
Today’s news flow looks thin, so the demand for risk assets will be driven by the performance of UST yields, as well as news about Evergrande. Given that US index futures are trading in positive territory, it is likely that price action will go up to 1.1755 (45-degree angle) during the European session. However, if the pressure builds and euro selling resumes from the LB line, the next target for sellers will be 1.1685 (15-degree angle).