FXA

China continues to harass Taiwan with incursions into its air defense zone. The bullying practice has escalated in the past week or so.European banks took 174.5 bln euros from the ECB's latest Targeted Long-Term Refinancing Operation.In the UK, Chancellor Sunak canceled the fall budget and is expected to present a new jobs support program to Parliament today.

Japan's preliminary September PMI was little changed from October, and the composite remained below the 50 boom/bust level.The French PMI showed a similar pattern to the German report, but a bit worse.The US preliminary PMI is expected to follow the European pattern of a continued recovery in the manufacturing sector and some softness in services.

The S&P 500 tumbled for its fourth consecutive, the longest losing streak since February. The dollar strengthened broadly.Asia Pacific shares were lower, led by a 2.4% decline in South Korea and around a 1% loss in China and Taiwan.Gold held yesterday's low near $1882.50. Last month's low was nearer $1863. It is poking above $1900 in Europe.November WTI slipped below $39 a barrel yesterday but has remained above there today and is testing the $40 area.

-Fox News interview

Not surprisingly, China's Prime Loan Rate was left unchanged for the fifth consecutive month at 3.85% and 4.65%, respectively, for the one and five-year benchmarks.S&P is concerned that Spain's political climate may struggle to pass the 2021 budget and continue to press ahead with reforms.Sterling encountered offers over the last three sessions around $1.30, and today it has been sold down to $1.2835.

The major central banks have met, and not one announced fresh policy action.All the brouhaha about the rapid rise of the euro misses that it has been moving sideways for nearly two months.With all the commentary on the euro, it was the yen, whose 1.6% gain last week, led the majors.It arguably was a cleaner way to express a bearish dollar view.

EUR/AUD has traded lower recently, back in line with its previous trading range between 1.60 and 1.65.However, while risk sentiment and macroeconomic indicators seem to support downside, longer-term models indicate upside potential.The market may decide to take the 1.60 handle, and the recent lows below this handle, in the short to medium term.On the other hand, euro area terms of trade are holding up against Australia, and while Australia is flirting with deflation, ECB rates are unchanged on the year while the RBA cut rates from +0.75% to +0.25%.Provided the euro area can improve its economic record into 2021 (preferably to be "on par" with Australia), our longer-term Purchasing Power Parity model would suggest the potential for significant upside (even above the highs of this year of around 2.00). If recent lows below 1.60 are revisited, this might signal a buying opportunity.

Japan's August CPI was unsettling.The dollar has not been able to resurface above JPY105 today for the first time since late July.The Fed's balance sheet jumped by nearly $54 bln last week to $7.06 trillion, its largest since the end of June.Canada reports July retail sales.