Asia Braces after Market Selloff. USD/JPY Prices Eye Trend Support

Asia Pacific Market Open – Wall Street Selloff, Brexit Optimism, GPB/USD, US Dollar, USD/JPY

We just released our 4Q forecasts for equities and the US Dollar in the DailyFX Trading Guides page

A storm has rattled financial markets akin to the intense selloff witnessed back in February and it may have been for similar reasons. The S&P 500 tumbled 3.29%, the NASDAQ Composite plummeted 4.08% and the Dow Jones Industrial Average shed 3.15% off its price. In general, stock markets have not been faring well in the aftermath of a third Fed rate hike this year and with potentially one more to come in December.

Granted, that probability has now declined from about 80% to 71.7% when looking at overnight index swaps following today’s developments. US government bond yields tumbled as investors bought into what is effectively known as the world’s benchmark risk-free asset. Interestingly, despite the demand, the US Dollar was fairly little changed if not cautiously lower by the end of Wednesday’s session.

The greenback was higher against the commodity bloc of FX such as the Canadian, Australian and New Zealand Dollars. It underperformed against typical anti-risk currencies such as the Japanese Yen and Swiss Franc. Other FX majors that stood tall versus USD were the Euro and the British Pound which may have been as a result of Brexit optimism bets ahead of a speech from Chief EU negotiator Michael Barnieras expected.

In his speech to EU commissioners, Mr. Barnier noted that about 80 – 85% of a withdrawal agreement has been met and is within reach. UK and German front-end government bond yields briefly surged ahead of the speech which helped propel EUR/USD and GBP/USD higher. Then, bond yields tumbled as the intense stock market selloff accelerated. Yet, both the Euro and Sterling remained elevated.

Taking

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