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Daily FX View: USD Underperforms On Partial Govt Shutdown

USD down vs 18 of 24 major peers as Congress remains deadlocked over government funding, amid concerns over longer-term implications for debt ceiling, fed policy and economic growth.

• DXY breaching low made Sept. 18 after FOMC delayed taper start

• Technical support: ~79 support since May 2012

• Key issues in Congressional deadlock:

• Delaying start of health care legislation by 1 yr; Republican stance is legislation isn't ready for implementation and/or don't want to fund program at all

• No further talks scheduled between Senate and House

• Debt ceiling: May be reached on/after Oct. 17, any compromise to raise borrowing limit may require further cuts in government spending, threat of default

• AUD outperforms all 24 major peers overnight on increased probability of U.S. taper delay, RBA decision, solid AUD data

• RBA holds cash rate steady at 2.50%; statement notes sub-trend growth, that existing accommodation still working through economy

• Data supports AUD: Aug. new home sales 3.4% M/m from -4.7%; retail sales for Aug. 0.4% M/m vs est. 0.3%, prior 0.1%

• AUD/USD rebounds, breaching downtrend since Sept. 18 after doji day yesterday

• Resistance: 0.9529 Sept. 29 high

• Support: 0.9281 Sept. 30 low, ~0.9225 Aug. 19 high, Sept. 13 low

• EUR/USD only modestly higher, with EUR weighed by Italy German data

• German jobless 25k vs est. -5k, unemployment rate 6.9% vs est. 6.8%, mfg PMI 51.1 vs est. 51.3

• EUR/USD tests above 1.3569 Sept. 19 high, subsequent high 1.3711 Feb. 1

• Support 1.3462 Sept. 25 low, 1.3452 Aug. 20 high

• CAD, MXN down vs USD on concern over potential U.S. slowdown

• USD/CAD modestly higher, consolidating 1.0300/0325 area

• Forming doji day for 4th consecutive session

• Resistance: 1.0341 Sept. 26 high, ~1.044 July 16, Aug. 7 highs

• Support: 1.0271 Sept. 24 low, 1.0182 Sept. 19 low

• USD/MXN modestly higher, testing uptrend since Sept. 19

• Resistance: 13.4337 Sept. 30 high, 13.4383 Aug. 30, 2012 high

• Support: 12.5830 Sept. 19 low, 12.55 Aug. 12 low

• NOTE: TJ Marta is an FX strategist who writes for First Word. The observations he makes are his own. To contact TJ Marta, click here.