The Industry Spread

Global Trading Industry News & Information

You are here: Home / Archives for USD/JPY

Euro Extends Drop, ECB Stimulus Bets Rise, Dollar Steadies

by Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: , , , , , ,

Summary: The Euro extended its drop for the 4th straight day to 1.1090 (1.1115) on rising bets of a bold stimulus package from the ECB in their next meet (September 12). On Thursday, ECB Governing Council Member Olli Rehn suggest that the Europe’s central bank could restart its QE program. Sterling rallied 0.4% to 1.2145 (1.2105) as growing opposition to PM Boris Johnson’s promise to take Britain out of the EU with or without a deal forced crowded shorts to cover. The Dollar Index (USD/DXY) steadied to 98.203 (98.096) after a jump in US Building Permits offset a fall in Housing Starts. On Sunday, White House Economic Adviser Larry Kudlow said that there is little risk of a recession despite a volatile week for bond markets. Treasury yields stabilised with the benchmark 10-year rate finishing up 2 basis points at 1.55%.
Wall Street stocks gained with risk appetite with the Dow finishing the week up 1.2% to 25,920. (25,600). The S&P 500 gained 1.4% to 2,892.
The Eurozone’s Trade Surplus narrowed to EUR 17.9 billion in July. US Building Permits rose to 1.34 million units from 1.23 million while Housing Starts dropped to 1.19 million from 1.25 million the previous month.

BLOOMBERG US TREASURY YIELD TABLE - 19 AUGUST 2019

BLOOMBERG US TREASURY YIELD TABLE – 19 AUGUST 2019

–          EUR/USD – slip-sliding away, the Euro extended its retreat to finish at 1.1090 from 1.1115. The shared currency fell for the fourth day in a row as market bets grow for an ECB stimulus move in their upcoming September policy meeting.

–          GBP/USD – Sterling rallied as crowded shorts ran for cover on growing opposition from political parties to Boris Johnson’s pledge to take Britain out of the European Union with or without a deal. The British Pound climbed against both the US Dollar (1.2145 from 1.2105) and Euro (0.9130 from 0.9183).

–          USD/JPY – The Dollar edged higher against the Japanese currency to 106.35 (106.05 Friday) as US treasury yields steadied. The 10-year US yield climbed 2 basis points to 1.55% while Japan’s 10-year yield was at -0.24% from -0.25% Friday.

–          AUD/USD – The Aussie finished little changed at 0.6775 (0.6778) after the risk of a September rate cut was lessened by RBA speak last week.

On the Lookout: Trade tensions will still drive the markets as we look to the week in front of us. Latest media releases saw President Trump accuse Chines tech giant Huawei as a national security threat. Trump also warned China of negative trade impacts should they use force on Hongkong protesters.
Today’s economic report releases are mostly second tier, but they will pick up starting tomorrow. The week’s big event is Friday’s annual Kansas City Fed’s Jackson Hole, Wyoming global central bank symposium where Jerome Powell is scheduled to open the gathering. Markets will be looking to Powell to gauge if US policy makers will add to July’s rate reductions.
New Zealand PPI input and output start today’s reports. Japan’s Trade Balance follows. The Eurozone’s Current Account Balance, Final Headline and Core CPI reports round up today’s data releases.

Trading Perspective: The latest Commitment of Traders/CFTC report saw speculative US Dollar longs trimmed further. Which gives more room for a Dollar rally, particularly against the Euro. We look at the breakdown of currencies in tomorrow’s report. The Dollar Index (USD/DXY), a mirror of the Euro, gained for 4 out of 5 trading days closing at 98.20. On Friday, China fixed its Yuan weaker against the Greenback which saw Emerging Market currencies mostly weaker. This is also mildly Dollar supportive.

1.       EUR/USD – The Euro traded to an overnight and eight-day low at 1.10663 before steadying to close at 1.1090. Immediate support can be found at 1.1060 and 1.1040. A break could see us down to 1.1025, July 31 lows. Immediate resistance can be found at 1.1110 and 1.1140. Tomorrow sees the release of Euro area Manufacturing and Services PMI data which could pile on more pressure on the single currency if they point to a Euro area recession. For today look for a likely trading range of 1.1070-1.1120. Can’t go wrong trading that range.

2.       GBP/USD – The British Pound extended its gains as shorts scrambled to cover when the currency didn’t rall any further. We reported last week that speculative GBP shorts rose to multi-year highs which is a danger sign to any further shorts. GBP/USD closed at 1.2145. Immediate resistance lies at 1.2175, overnight highs. The next resistance level can be found at 1.2210 and 1.2250. Immediate support can be found at 1.2110 followed by 1.2075. Look for a likely trading range today of 1.2120-1.2180, prefer to buy dips.

CNBC USD DXY (Dollar Index) 1 Y Chart - 19 AUGUST 2019

CNBC USD DXY (Dollar Index) 1 Y Chart – 19 AUGUST 2019

3.       USD/JPY – The Dollar has traded between 105 and 107 for the past three weeks and held both levels well. No reason to see any change in that for now. USD/JPY closed at 106.35 (106.05 Friday). Overnight high traded was 106.50, which is immediate resistance. The next resistance level can be found at 106.70 and then 107.00. Immediate support lies at 106.00 (1060.025 overnight low) and 105.85. Look to trade a likely range of 106.00-106.60 today. Just trade the range shag on this one today.

4.       AUD/USD – The Australian Dollar ended little changed at 0.6775 (0.6778 Friday). Overnight low traded was 0.670 which is today’s immediate support. The next support level lies at 0.6740. Immediate resistance can be found at 0.6800 (overnight high was 0.67951). The next resistance level is at 0.6820. The RBA’s latest meeting minutes are released tomorrow. There has been less negative rate cut chatter since after two policymakers (Kent and Lowe) poured cold water on the possibility. We reported last week that with the Australian Dollar TWI so low, there was less likelihood of that possibility. Like Sterling, Aussie net short speculative bets continue to grow. This supports the downside. Look to trade a likely range today of 0.6770-0.6820. Prefer to buy dips.

Have a good week ahead, happy trading all.

Strong Sales Data Lifts US Dollar Even as Bond Yields Extend Drop

by Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: , , , , , , ,

Summary: Global Fixed Income markets extended their relentless rally on increased concerns of an economic slowdown. The benchmark US 10-year bond yield dipped under 1.5% for the first time since 2016, steadying to close at 1.53% (1.58% yesterday). Better-than-forecast US Retail Sales soothed fears that the US could be headed for a recession and lifted the Dollar, which had earlier fallen. The Dollar Index (USD/DXY) rose to 98.096, up 0.11%. A call for a “significant and impactful policy package” in September by rate setting committee member Ollie Rehn pushed the Euro 0.35% lower to 1.1113 (1.1136). The Dollar steadied against the Yen to close at 106.03 (105.95 yesterday). Sterling rallied to its highest close in a week to 1.2105 (1.2055) on news that the Labour Party was preparing a bid to oust Boris Johnson and stop him from leaving the EU without a deal. Better UK inflation and retail sales data have eased concerns of a weakening economy. The Australian Dollar finished 0.25% higher at 0.6778 (0.6750) after the economy created a robust +41,100 Jobs in July (against a forecast rise of 14,200).

Forex Factory US Core Retail Sales Chart - 16 August 2019

Forex Factory US Core Retail Sales Chart – 16 August 2019

Wall Street stocks managed gains after another volatile session. The DOW was up 0.67% to 25,615 while the S&P 500 rose 0.5% to 2,851.
President Trump signalled better chances of a trade deal with China while repeating his criticism of the US Federal Reserve. Meanwhile, Fed policymakers and noted doves Kashkari (Minneapolis) and Bullard (St Louis) kept their bearish views intact while keep a watch and wait stance.

  • EUR/USD – The Euro fell after ECB policy maker and Bank of Finland Governor Ollie Rehn said that the “ECB needs to come up with a significant, impactful policy package” in September. EUR/USD dipped to 1.10915 before settling to close at 1.1110 (1.1137).
DAILY FX STERLING CHART - (1H) - 16 AUG 2019

DAILY FX STERLING CHART – (1H) – 16 AUG 2019

  • GBP/USD – After two days of solid economic data (inflation and retail sales) the British Pound climbed to over one-week highs at 1.21509 before settling at 1.2105 from 1.2055 yesterday. The UK Labour Party said that it would call for a no confidence vote in Boris Johnson’s government as soon as it believes it can win it and form a government to delay Brexit. A paring of short GBP bets, running at multi-year highs added to the Pound’s support.
  • AUD/USD – The Aussie Battler rebounded 0.75% to 0.6778 after the economy added a robust 41,100 Jobs in July beating median forecasts of +14,100. The Unemployment rate was unchanged at 5.2%
  • USD/JPY – The Dollar held against the Yen, managing a modest gain of 0.15% to 106.03 (105.93 yesterday). Safe haven flows into the Japanese currency slowed after President Trump tweeted he thinks that the trade war with China will be fairly short.

On the Lookout: Markets will focus on upcoming economic data reports as we head to the second half August where data and events will pick up. Traders will be watching the rhetoric from China in reaction to Trump’s latest tweet that he thinks the trade war will be fairly short.
Economic data releases today are light with most of them coming from the US.
Earlier today, New Zealand’s Business NZ Manufacturing Index dipped to 48.2 in July from 51.3. Japanese Investment in Japanese Stocks and Foreign Bonds round up Asia data.
Euro area data follows with the Euro zone’s Trade Balance. US data reports today start with US Building Permits and Housing Starts. Finally, the US reports on its Preliminary University of Michigan Consumer Sentiment and UOM Inflation Expectations.

Trading Perspective: The fall in US bond yields was matched by those of it’s Rivals. This provided support for the Dollar, enabling the USD/DXY to climb 0.11%. Which should be mildly supportive of the Greenback in Asia today. Germany’s 10-year Bund yield slumped to -0.72% (-0.65% yesterday). Japan’s 10-year JGB yield was down 2 basis points to -0.25%. Australian 10-year treasuries were yielding 0.88%, 6 basis points lower than yesterday.
It’s a Friday and an ideal day to trade ranges. There will be opportunities on both sides. Bullish or bearish, choose your levels well.

  1. USD/JPY – The Dollar finished in New York at 106.02 steadily climbing to 106.10 this morning. The rate differentials between the US 10-year and its Japanese counterpart narrowed however the risk-off stance has eased. This should provide trading opportunities in this puppy to trade either or both sides. Immediate support lies at 106.00 followed by 105.70 (overnight low 105.703). We could be forming a consolidative range between 105. and 107. Work your levels on those parameters. Look to trade a likely range between 105.90-106.90. Prefer to buy on dips. Remember that speculators have now turned long JPY (COT/CFTC) report yesterday.
  2. EUR/USD – The Euro retreated following ECB policymaker Rehn’s comments on the need for significant ECB stimulus at their meeting next month. The Euro rallied to a high at 1.11583 before settling at 1.1115 this morning. Immediate support lies at 1.1090 (overnight low 1.10915) followed by 1.1070 (strong). Immediate resistance can be found at 1.1140 and then 1.1180. Look for a likely range today of 1.1090-1.1160. Prefer to buy dips.
RBA - AUD TWI Table of Currency Weights - 16 August 2019

RBA – AUD TWI Table of Currency Weights – 16 August 2019

  1. AUD/USD – The Aussie Battler survived massive bearish sentiment that saw the Australian Dollar Trade Weighted Index slide to over a decade low. This is the currency measure preferred by RBA when considering policy (as opposed to AUD/USD). The main trading AUD TWI currencies are Chinese Yuan, Japanese Yen, Euro and the US Dollar (roughly 58% of the AUD TWI weight). Other currencies are the South Korean Won, Indian Rupee, New Zealand Dollar, Singapore Dollar and the British Pound (as at 2018). From this writer’s trading experience, the RBA will not lower rates if things stay the same given the low AUD TWI. The Aussie has immediate support at 0.6740 followed by 0.6710. Immediate resistance can be found at 0.6800 and 0.6840. Look for a likely range today of 0.6755 and 0.6815. Prefer to buy dips.

Happy Friday and trading all.

US Bond Yield Plunge Raise Recession Fears, Stocks Sink

by Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: , , , , , ,

Summary: “What a difference a day makes, 24 little hours..” Yesterday’s risk-on move proved short-lived as US bond yields plunged anew. Ten and two-year yields ended at parity (1.58%), heading toward a yield inversion which screams recession. President Trump’s move to de-escalate the trade war with China was discounted by traders and investors alike. Recent past initiatives have proved ineffectual. This time Trump took aim once again at Fed head Jerome Powell, blaming the near inversion curve on Fed policy. Adding to market woes was a shocking read in China’s trifecta of economic data, all of which had big misses. China’s July Industrial Output rose 4.8%, its slowest in 17 years, widely missing forecasts of 6.0%. Eurozone Industrial Production fell to –1.6% from forecasts of -1.4% in June. Germany, Italy and the UK are likely headed for a recession according to some analysts. The Euro lost 0.41%, retreating to fresh two-week lows at 1.11308, settling at 1.1138 (1.1172 yesterday). The Yen re-asserted its uptrend, with USD/JPY losing 0.7% to 105.82 (106.72). Sterling was little changed at 1.2052 (1.2057) despite a rise in the UK Consumer Price Index to an annual 2.1% in July from 2.0% in June. Sentiment on the British currency remained weak on the likelihood of a no-deal Brexit on October 31 with Boris Johnson in power. Global recession fears and a risk-off stance led the Australian Dollar lower to 0.6750 (0.6793 yesterday). China’s Offshore Yuan dipped (USD/CNH 7.0550 from 7.0150 yesterday). EM currencies were lower.

CNBC US BOND YIELD TABLE - 15 AUGUST 2019
China’s Retail Sales missed forecasts of 8.6%, falling to 7.6% while Fixed Asset Investment was down to 5.7% from 5.9% forecast.

  • USD/DXY – despite the plunge in US bond yields, the Dollar Index, which often mirrors the Euro, climbed 0.18% to 97.991 (from 97.837). While an inversion of the US bond yield curve signals a recession, fundamentals in other G10 countries look worse. Which boosts the Greenback’s appeal.
  • EUR/USD – The Euro retreated further to fresh two-week lows at 1.11308, settling at it’s current 1.1143 in early Sydney. Eurozone data released yesterday mostly underwhelmed and weighed on the Single currency.
  • AUD/USD – The Aussie Battler, always a loser in a risk-off environment dipped anew to 0.67454 overnight before settling at 0.6750 this morning. Dismal Chinese economic data also pulled the Aussie down.
  • USD/JPY – the Dollar reversed its gains, dropping to 105.95 from 106.72 yesterday and a high at 106.977 Tuesday night. The benchmark US 10-year yield plunged 12 basis points to 1.58% while Japan’s 10-year JGB yield was up two basis points to -0.23%.

On the Lookout – FX will continue to monitor the asset markets and their reaction in Asia. The Hongkong protest crisis is getting worse and the likelihood of China’s intervention is high. Which will add damage to the already fragile relationship with the US. Already there are reports of a Trump initiative to dialogue with Chinese President Xi.
Economic data releases today will also affect FX and risk.

Australia starts off with its July Employment report (11.30 am Sydney). Japanese Industrial Production and Capacity Utilisation follow.  Euro area data sees UK Headline and Core Retail Sales (July). The US finishes off our trading day with a plethora of data: Headline and Core Retail Sales, New York Empire State Manufacturing Index, Philadelphia Fed Manufacturing Index, US Capacity Utilisation, Industrial Production and Weekly Jobless Claims.

Trading Perspective: The Dollar will eventually succumb against it’s rivals without yield support. While a risk-off environment will benefit certain currencies, we can expect the Greenback to decline overall.  Market volumes continue to be low this month but expect a pick-up toward the end. Next week’s Jackson Hole annual global central bank symposium (August 24) is highlighted by a speech from Fed Chief Jerome Powell. Who has stayed quiet despite Trump’s accusations. Interference by the White House through Trump’s tweets are only adding to the market’s risk-off mood.


The latest COT/CFTC on the nine IMM currencies saw speculators increase long bets against the Yen (first time this year) and Canadian Dollar. Speculative shorts against Sterling and  the Australian increased while Euro shorts were pared further. Biggest moves in market positioning came in the Yen and British Pound.

  1. USD/JPY – The haven sought Japanese currency continues to outperform, against the US Dollar and many other currencies. The risk-off, recession fearing market sentiment favours the Yen. USD/JPY fell back to 105.652 overnight before settling currently at 105.92. Immediate support for today lies at 105.65 followed by 105.25. Immediate resistance can be found at 106.30 and 106.70. The latest COT report saw speculators turn their short JPY positions into long JPY for the first time this year. Net speculative JPY longs (week ended July 6) totalled +JPY 10,561 bets from the previous week’s -JPY 4,218. That’s a turnaround of JPY 14,779 contracts. And while the numbers aren’t big on the surface it’s a significant change. Traders are now short USD/long JPY which should see the psychological 105.00 level hold. Look for a likely range of 105.60-106.60. Prefer to buy dips.
  2. GBP/USD – Sterling continues to trade within a range of 1.2020 and 1.2120 while all the chaos goes on in the asset markets. It’s wedged in between an overall weaker US Dollar and bearish Brexit sentiment with new PM Boris Johnson calling the shots. UK economic data has been at par of slightly better than forecast this week. And the latest COT/CFTC report saw speculative GBP shorts increase to their highest in a year. Net speculative GBP shorts increased to -GBP 102,702 contracts from the previous week’s -GBP 90,150. That’s huge. GBP/USD has immediate support at 1.2040 (1.2045 overnight low) and 1.2010. Immediate support can be found at 1.2080 and 1.2120. Prefer to buy dips near 1.20.

RBA AUD TWI CHART 2 – 15 AUGUST 2019

  1. AUD/USD – The Australian Battler faces a risk-off environment with sentiment still heavy at current levels. We reported last week that the Aussie TWI is near lows not seen since 2008. That’s huge. Net speculative Aussie Dollar shorts increased in the latest COT report (week ended July 6) to -AUD 55,511 bets from -AUD 53,442 the previous week. AUD/USD has immediate support at 0.6740 and 0.6710. Immediate resistance lies at 0.6780 and 0.6810. Australian Employment data today will drive the currency in the short term. Watch for the breakdown in Full-time (+21,100 last month) against Part-time Jobs (-20,600). Prefer to buy AUD on dips with a likely range today of 0.6740-0.6790.

Tin helmets on, happy Thursday and trading all.

Trump Delays Some China Tariffs, Haven Trades Unwound

by Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: , , , , , ,

Summary: Haven trades were unwound after US President Trump delayed 10% tariffs on some Chinese products scheduled to begin next month. The move resulted in a massive squeeze on long Yen and Swiss Franc trades built up in the past few days. USD/JPY soared to 106.72 (105.28) at the NY close, up 1.28% while the Dollar gained 0.73% against the Swiss Franc to 0.9765 (0.9693 yesterday). The Euro slid to 1.1172 from 1.1215 after a big miss on Germany’s ZEW Economic Sentiment Index last month. USD/DXY (Dollar Index), usually a mirror of the Euro, rose to 97.837 from 97.420, up 0.47%. Despite a robust UK Wages report, Sterling dipped to 1.2057 (1.2075) with Brexit still weighing on sentiment. Resource and Emerging Market currencies led by the resurgent Aussie Battler, up 0.47% to 0.6795 (0.6752 yesterday), rebounded.  Flight-to-safety Treasuries fell while stocks rallied, and yields climbed. The US 10-year bond rate was up 5 basis points to 1.70%. Wall Street stocks soared led by the S&P 500, up 1.72% to 2,933.00.

FOREX FACTORY UK Wages Chart - 14 AUGUST 2019

FOREX FACTORY UK Wages Chart – 14 AUGUST 2019

The Dollar was also supported by a rise in US Consumer Prices. US July Core CPI was up 0.3% against forecasts of 0.2%. Headline CPI matched expectations at 0.2%. Germany’s ZEW Economic Sentiment Index slumped to -43.6 against a forecast of -21.7. UK July Average Earnings (Wage growth) climbed to 3.7%, (3.5% in June) the strongest in 11 years.

  • USD/JPY – reversed on the return of risk appetite as Yen longs ran for cover. The Dollar soared to 106.977 before settling at 106.72 in late New York. USD/JPY traded to a low at 105.05 yesterday.
  • AUD/USD – The Aussie rallied with risk to close at 0.6795 from 0.6752 yesterday. RBA Assistant Governor Kent said in a breakfast speech yesterday that the central bank is not targeting unemployment, pouring cold water on the possibility of negative interest rates.
  • EUR/USD – The Euro dipped to 1.1172 from 1.1215 yesterday. The climb in the US 10-year bond yield contrasted with that of Germany’s which fell 2 basis points to -0.61%. EUR/USD topped out around the 1.1230 (1.12285) area again.
  • GBP/USD – Sterling eased back to close at 1.2057 from 1.2075 yesterday despite the robust Wage report. The Bank of England will put off any interest rate moves until the Brexit deadline which limits the Pound’s topside.

On the Lookout: The trade concession by President Trump is significant in that it is the first positive move in the trade conflict between Washington and Beijing. The US Trade Representative said it would delay 10% tariffs on some Chinese products (laptops and cellphones) scheduled to begin next month. Whether this leads to anything more substantial, or this becomes the new normal in today’s tariff world remains to be seen.
Meantime economic data releases resume today. Australia’s Wage Price Index and the Westpac Consumer Sentiment Index start off today’s report. China’s trifecta report of Industrial Production, Retail Sales and Fixed Asset Investment, including China’s Jobless rate follow. Euro area data see German Preliminary GDP (Q2), French Final CPI (July), Eurozone Flash Employment Change, Flash Q2 GDP, and July Industrial Production. The UK reports on its Headline and Core CPI, PPI Input and Output. US Import Prices round up the day’s reports.

Trading Perspective: The reverse move in the asset and haven markets are the result of a large unwind of trades in low volume August trading. While the trade concessions are significant, the headlines may be a case of I’ve seen that scene before. What happens next will be closely monitored.
Market positioning from last week has not changed much among the IMM currencies except for Sterling. The latest COT/CFTC report (week ended 6 August) saw net speculative short GBP bets have increased significantly over the past week. We take look at a breakdown of the individual currencies in tomorrow’s report.

FOREXLIVE USD JPY Hourly Chart - 14 AUGUST 2019

FOREXLIVE USD JPY Hourly Chart – 14 AUGUST 2019

  1. USD/JPY – The Dollar saw a big short-covering move in low volume to 106.977 overnight highs before settling at 106.72 in late New York. Yesterday, USD/JPY slumped to a low of 105.05 before settling. Haven trades were unwound which was the biggest factor in the Dollar’s strong bounce. The US 10-year bond yield bounced to 1.70% from 1.65% yesterday while Japan’s 10-year JGB rate was down two basis points to -0.25%. Which also supported the Greenback. It seems like the USD/JPY 105.00 psychological support level is the BOJ’s line-in-the-sand for now. Immediate support today lies at 106.40 followed by 106.00. Immediate resistance can be found at 107.00 and 107.30. Look to trade a likely range today of 106.20-106.90.
  2. EUR/USD – The single currency failed once again at the 1.1230 level, topping out at 1.12288. The Euro slid to an overnight low at 1.11702 before settling at 1.1174 at the New York close. Immediate support for the Euro lies at 1.1160 (3-week low) followed by 1.1130. Immediate resistance can be found at 1.1200 and 1.1230. Look to trade a likely range today of 1.1160-1.1220. Prefer to buy dips from current levels.
  3. AUD/USD – The Aussie got a further boost on the US trade concessions for some Chinese goods. AUD/USD closed at 0.6795 after trading to an overnight high at 0.68183. Yesterday the comments of RBA Assistant Governor Kent, who heads the Finance committee of the central bank, supported the currency. Kent saw no immediate need for negative interest rates, something that the local press has been highlighting this week. We reported that the Australian Dollar TWI is at multi-year lows. The RBA is aware of that and will not put the currency under more pressure with negative interest rates. AUD/USD has immediate resistance at 0.6820 and 0.6850. Immediate support lies at 0.6770 and 0.6740. Look to buy dips with a likely range today of 0.6775-0.6825.

Happy trading all.

Treasury Yields Plunge on Geopolitical Tensions, FX Becalmed

by Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: , , , , , , ,

Summary: Geopolitical tensions arising from Hongkong protests and a primary election defeat of a pro-business President in Argentina boosted US treasuries. Hongkong authorities cancelled departure flights that were not checked in as protestors occupied the terminal. Argentinian voters scorned market-friendly President Mauricio Macri, handing the left-leaning opposition victory. Bond yields plunged in low volume trading. The US 10-year bond yield plunged 9 basis points to 1.65%. The Argentinian Peso sank 15%, weighing on Emerging Market currencies. Wall Street stocks sold off. Major FX was becalmed amidst the August lull, with many traders on holiday. The Dollar Index (USD/DXY) slipped 0.14% to 97.42, weighed by lower US bond yields. Japan’s Yen extended its rally against the Dollar to 105.05, it’s highest this year, settling at 105.28 at the close. The Euro rallied 0.2% to 1.1215, while Sterling gained 0.49% to 1.2075 (1.2025 yesterday). Continuing risk-off sentiment and weak Emerging Market currencies weighed on the Australian Dollar, down 0.47% to 0.6752 (0.67850). Gold prices increased by 0.99% to US$1,511.50, above the 1,500 USD level and highest this year. The DOW was down 1.43% to 25,900. (26,277. Yesterday).

BLOOMBERG MARKETS SPOT GOLD PRICE CHART - 13 August 2019

BLOOMBERG MARKETS SPOT GOLD PRICE CHART – 13 August 2019

  • USD/JPY – The Dollar slide to 105.05, fresh lows since earlier this year when the flash crash occurred. Risk-off sentiment continued to favour the haven-sought Yen. USD/JPY rallied off the lows to close at 105.28 in New York. Volumes were low as Tokyo enjoyed a holiday yesterday.
  • EUR/USD – The Euro shrugged off Italy’s political woes, climbing 0.2% against the Dollar to finish at 1.1215 from 1.1185 yesterday. Germany’s 10-year Bund yield fell one basis point to -0.59%, narrowing the rate gap with its US counterpart.
  • AUD/USD – Risk-off sentiment and weaker Emerging Market currencies continued to weigh on the Aussie Battler. The Australian Dollar fell 0.47% to 0.6752 from 0.6785 yesterday. In a speech this morning at a Finance and Treasury Breakfast in Sydney RBA Assistant Governor Christopher Kent (Financial Markets) said that the RBA is not targeting unemployment, suggesting that negative rates are not necessary.

On the Lookout: With Tokyo back into the fray today, volumes should pick up. However, the influence from the Northern Hemisphere August vacation period is still in play. Economic data releases pick up today and tomorrow. Traders will continue to monitor events in Hongkong.
Earlier this morning New Zealand’s Food Price Index climbed 1.1% in July from June’s fall of -0.7%.
Australia releases its NAB Business Confidence Index (July) with Japanese Tertiary Activity following.
The Euro area starts off with Germany’s Final CPI (July) and Wholesale Price Index and its ZEW Economic Sentiment Index. The UK’s Employment report for July comes next with Average Earnings Index (3m/year), Claimant Count Change, and Unemployment rate. US Headline and Core CPI data (July) round up the day’s reports.

Trading Perspective: The fall in US treasury rates have not been matched by its counterparts in terms of extent. Which narrows the differentials and weighs on the Greenback. The 10-year US bond yield plunged 9 basis points to 1.65%. In contrast, German, UK, Japanese and Australian 10-year rates were much unchanged. The US 30-year rate fell to 2.13%, the lowest of this year.

CNBC US 30-Year Bond Yield Chart - 13 AUGUST 2019

  1. USD/JPY – The Yen should continue to be sought after in the current environment. Lower US 10-year rates will keep USD/JPY pressurized. However, the 105.00 psychological level held last night. With Tokyo back from it’s holiday yesterday, we can expect more two-way trade with the 105.05 overnight and yearly low to hold. Japanese corporates will be buyers on dips. The next support level can be found at 104.70. Immediate resistance lies at 105.70 and 106.10. Look to buy dips with a likely range today of 105.10-105.90.
  2. EUR/USD – The Euro drifted higher as the Dollar weakened against most of the major currencies. The narrowing rate gap between German and US rates should keep the Euro supported. German’s ZEW Economic Sentiment is released today. Immediate support for the Euro lies at 1.1200 followed by 1.1180. Immediate resistance can be found at 1.1230 (overnight high was 1.12306). The next resistance level is found at 1.1260. Look to buy dips in a likely 1.1200-1.1260 range today.
DAILY FX - AUD USD CHART - 13 AUGUST 2019

DAILY FX – AUD USD CHART – 13 AUGUST 2019

  1. AUD/USD – The Australian Dollar climbed off its lows after RBA Assistant Governor Kent suggested that negative interest rates were not necessary when he said in a speech this morning that they are not targeting unemployment. AUD/USD moved up a mere 10 pips to 0.6760 from 0.6750 before settling at 0.6750. Risk-off sentiment continues to weigh on the Aussie Battler and will likely keep a lid on the topside. Immediate resistance can be found at 0.6785 and 0.6805. Immediate support lies at 0.6740 (overnight low 0.6745) followed by 0.6710. Kent, who heads the RBA’s Financial Markets division is aware that the Australian Dollar is near long term lows on a Trade Weighted basis. While the RBA have stated their preference for a weaker currency a few years ago, today is a different story. An Aussie Dollar which is too low is not ideal for the country either. Look to buy dips with a likely range today of 0.6740-0.6810.

Happy trading all.

Prolonged Sino-U.S. Trade War Cues Influences Mixed Activity in Global Equities

by Leave a Comment Filed Under: Market News - US Open Tagged: , ,

BORIS JOHNSON

Geo-political woes affect risk asset demand in European markets, cautious investor sentiment dictates and drives price action of key assets in the global market.

Summary: Amid lack of fresh geo-political cues, Asian market saw relatively positive activity on most major Asian benchmark indices, while a few popular stocks and risk assets still traded in red. Prolonged Sino-U.S. trade war cues, internal political scenario woes and increasing odds of no-deal Brexit outcome continued to affect investor sentiment and risk appetite in the European market causing major benchmark indices, key stocks and risk assets to see sharp declines today. Further, caution influenced by bidding war for German lighting group Osram also affected activity in European equity markets. In Forex market, risk aversion has caused major global currencies to trade in red despite the dovish influence surrounding USD which has helped limit decline to some extent.

Precious Metals: Amid Holiday thin trading session in Asian market and cautious trading activity in European markets, Gold held steady above $1500 per ounce while silver also traded positive in the global market. Safe haven demand influenced by geo-political cues are expected to keep precious metal bulls underpinned in immediate and near future trading sessions.

Crude Oil: Crude oil price is seeing flat activity amid woes surrounding prolonged trade war and holiday thinned market participation today. Geo-political cues from trade dependent European economy is also a dovish sign as all these events hint at slowdown in global economic activity which is bad for crude oil price owing to decreased demand for crude oil consumption.

USD/JPY: The pair saw dovish activity today as well given weakness surrounding US Dollar and increased demand surrounding Japanese Yen. Being a safe haven currency, amid increased risk aversion and holiday thin trading activity, the demand for Japanese yen surged considerably causing the price to go as high as 1½ year highs and the momentum is likely to continue in immediate and near future sessions.

USD/JPY

On The Lookout: Growing concerns surrounding escalating trade war tensions between China and U.S.A. and its impact on global economy given the scenario which hints at a drawn out economic warfare and political uncertainties in Europe, increased odds surrounding no-deal Brexit are beacons of risk aversion sentiment. This has caused investors to skip risk assets and invest in safe haven currencies, bonds and precious metals. Prospects for fresh elections in Italy given Matteo Salvini’s decision to pull back his support to ruling coalition party is talk of the town but there is prospect for move back firing if his coalition partner and opposition party team up but that could cause dire impact on Italian economy. Economic calendar is silent today aside from release of US Federal budget balance later today. Later in Pacific-Asian market hours traders await RBA asst gov Kent’s speech along with Japan PPI and Singapore preliminary GDP data for short term trading cues.

Trading Perspective: Caution in European market hours from local and international cues and holiday thin trading activity in Asian market caused US index and stock futures trading in the international market to see dovish activity today. On Earnings calendar, US market is set to see release of report from Sysco but the same is unlikely to cause visible impact on market. Given investor sentiment in the global market which is deep in bear’s territory, US Wall Street is likely to open in red and see subdued price action today.

EUR/USD: Euro is trading positive influenced by USD’s weakness. But China’s further devaluation of Yuan and internal political woes affect Euro capping gains. For now the pair is stable above 1.1200 handle. US Dollar is weighed down by escalating trade war woes between China and U.S.A. Traders now await fresh cues from US market for short term profit opportunities.

GBP/USD: The pair went as low as 1.2015 today but is mostly trading above mid 1.20 handle as news hinted that MPs are looking for ways to avoid no-deal scenario and on news of PM Boris Johnson’s visit to Paris and Berlin. Meanwhile, traders await fresh cues from US market for short term profit opportunities.

USD/CAD: The pair is trading positive in the global market today despite USD’s broad based weakness. The gains are led by weakness surrounding crude oil’s price action in the global market as escalating geo-political woes weighed demand for crude oil consumption hurting demand for crude oil usage. CAD being commodity linked currency was weighed down by weak Crude oil price. Traders now await fresh cues from US market for short term profit opportunities.

Please feel free to share your thoughts with us in the comments below.

Pound Sinks as Economy Shrinks, Trade Fears Lift Yen, Swiss

by Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: , , , , , ,

Summary: The Yen and Swiss Franc outperformed in the currency markets as trade concerns, weak global economic data, renewed calls by President Trump for a weaker Dollar boosted the two safe havens. In Britain, the Pound plummeted to 1.20239, lows not seen since January 2017 as the UK economy shrank for the first time since 2012. The US Dollar dropped to 105.267 against the surging haven Yen before settling to close at 105.65, down 0.3%. In Europe, political uncertainty in Italy had little effect on the Euro, which managed a 0.2% climb against the Dollar to 1.1202 (1.1182). The Dollar Index, a popular measure of the Greenback against 6 major currencies, dropped to 97.03 from 97.65 Friday. US President Trump repeated his call for a weaker currency to help American manufacturers. The USD/CNH rallied to 7.0970 from 7.0785 despite a lower Dollar PBOC Fix on Friday. The Australian Dollar dipped, falling back 0.45% to 0.6785 (0.6805) after RBA Governor Philip Lowe told Parliament on Friday the bank might be willing to do “unconventional things” like drop the cash rate to zero if the global economy doesn’t smooth out soon. Deteriorating US-China trade relations, North Korean missile tests and escalating protests in Hongkong weigh on risk appetite and the Aussie.

FOREX FACTORY UK Q2 GDP - 12 AUGUST 2019

FOREX FACTORY UK Q2 GDP – 12 AUGUST 2019

Wall Street stocks slipped while Treasury yields climbed. The US 10-year rate settled 2 basis points higher at 1.74%. The DOW slipped 0.4% to 26,277 at the NY close on Friday.
Japan’s Preliminary Q2 GDP beat estimates, up 0.4% from 0.1%. China’s PPI slipped to -0.3% in July from 0.0% June. The UK economy shrank to -0.2% in Q2 2019 below forecasts and the first contraction since 2012.

Reuters Graphics - Yen Surge As China US Trade War Escalates - 12 August 2019

Reuters Graphics – Yen Surge As China US Trade War Escalates – 12 August 2019

  • GBP/USD – Sterling was pounded by traders to 1.2023, its weakest since January 2017 after the unexpected contraction of the UK economy in Q2 2019. The Pound has already fallen 3.7% against the US Dollar after no-Brexiter Boris Johnson took over the Prime Minister’s role. GBP/USD opens at 1.2030 in early Sydney.
  • USD/JPY – The Dollar saw another fall against the haven sought Yen to 105.267, fresh 7-month lows before settling at 105.65. Japan’s Ministry of Finance has stepped up it’s verbal intervention as the Dollar approaches the psychological 105.00 level
  • AUD/USD – After rallying on Friday to 0.6822 the Aussie fell back to finish at 0.6785 after RBA Governor Graeme Lowe’s suggestion of zero interest rates. This has emboldened the Aussie Dollar bears, already predicting a slide to 10-year lows at 0.65 cents.

On the Lookout: Markets will continue to monitor China-US tensions which has been the dominant driver of risk assets and currencies. President Trump has repeatedly tweeted accusations of China’s manipulation of the Yuan. Traders will keep their eyes on the PBOC Daily Fix today and moves in the USD/CNH rate.
There are no major economic data releases or events scheduled for today. But the week ahead is loaded. And will likely impact the FX markets.
Japanese banks will be closed in observance of its Mountain Day holiday. But that doesn’t mean the Japanese authorities will not be monitoring the Yen, given the proximity of USD/JPY to the psychological 105 level.
The week ahead sees further British data the UK Employment report on Tuesday. Germany releases its CPI report as well tomorrow. Tomorrow also sees the US Headline and Core CPI report which is the highlight.
Wednesday sees Australian Wage data and China’s trifecta reports of Industrial Production, Retail Sales and Fixed Asset Investment. Euro-area sees Germany’s Q2 GDP. UK CPI and PPI reports for July are also due for release on Wednesday. The EU reports its Q2 GDP which is the highlight. On Thursday, Australia releases its Employment report which will determine what the RBA does next with interest rates. US July Retail Sales are also released.

Trading Perspective: Every currency has a story to tell with the China-US trade rhetoric and the PBOC’s Daily Fix today shaping those stories. The risk aversion them will continue to underpin the Yen and Swiss Franc. However, with USD/JPY close to the psychological 105 level, Japan’s Ministry of Finance will be closely monitoring the market, despite today’s Japanese holiday.
The Dollar Index, where the Euro, JPY, Swiss Franc carry 74.8% of the weight fell to 97.034, which is no wonder. The Dollar’s relatively strong performance despite the China-US trade war is starting to cause economic harm and worry analysts of a possible recession.

  1. USD/JPY – The Dollar Yen had a decent bounce off its fresh 2017 lows at 105.267 following President Trump’s ratcheting of tariffs against China have seen demand for haven Yen grow. The Dollar has dropped from 107.40 at the start of this month to Friday’s low. USD/JPY bounced back to 105.65 as US bond yields climbed. The US 10-year rate was up 2 basis points to 1.74% while Japan’s 10-year JGB yield fell 3 basis points to -0.23%. Expect Japanese corporate USD buying orders (which are placed with Japanese banks overseas given today’s Tokyo bank holiday) to support the Greenback at 105.20-30. Immediate resistance can be found at 105.80 and 106.20. Prefer to buy dips with a likely range of 105.25-105.85.
  2. AUD/USD – The Aussie drifted lower after the RBA’s meeting minute release and Governor Graeme Lowe’s testimony to Parliament on Friday. AUD/USD traded to an overnight low at 0.6778 before settling at 0.6785 at the close. AUD/USD has immediate support at 0.6770 and 0.6750. Immediate resistance can be found at 0.6800 and 0.6830. When the Aussie press starts to get bearish on the currency near its short-term lows, it may be time to buy. Likely range today 0.6770-0.6820.
  3. EUR/USD – The Euro grinded higher despite the political uncertainty in Italy. The Single currency slipped to 1.11782 before rallying to close at 1.1202. In early Asia, the Euro continued its drift higher to 1.1208. Immediate resistance can be found at 1.1230 (overnight high traded was 1.1223). The next line of resistance is found at 1.1280. Immediate support can be found at 1.1185 followed by 1.1155. Look to buy dips with a likely range today of 1.1190-1.1240.
Daily FX USD DXY Chart - 12 August 2019 (1)

Daily FX USD DXY Chart – 12 August 2019 (1)

  1. USD/DXY – The Dollar Index closed just above its immediate support at 97.00 (97.034). USD/DXY has its next support at 96.70. Immediate resistance lies at 97.30 followed by 97.60. The higher US bond yields should provide some support in the short term. However, the deteriorating US economic data and escalating trade war with China will continue to weigh on the Greenback. Look to sell rallies with a likely rang today of 96.80-97.30. ‘

Happy trading all.

Italian Woes Hurt European Equities, UK Economy Takes Worst Hit Since 2012

by Leave a Comment Filed Under: Market News - US Open Tagged: , , ,

Jeremy Corbyn

European market closes the week on disappointing note over data and Italian political scenario driven momentum. US & Canadian data in focus for short term profit opportunities.

Summary: Global equity markets are seeing dovish picture in last trading session of the day. Asian market saw relatively mixed outcome with China and Singapore markets taking a dovish hit while other major economies such as Australia, Japan, India, Korea and Taiwan saw positive outcome. Later in the day, equities across Middle East and European markets saw dovish performance on geo-political cues. In European market, instability in Italian government as Matteo Salvini, Leader of ruling League party pulled back his support for country’s ruling coalition adding more dovish influence to market which was already suffering from increased odds of No-Deal Brexit scenario and prolonged Sino-U.S. trade war. Further, data driven momentum saw bears drive the price to fresh lows as both EU and UK data disappointed with UK GDP, trade balance and manufacturing production data outcomes pointing to worst economic hit since 2012 just as UK and EU are heading to hard Brexit outcome scenario. Forex market is seeing mixed activity with risk aversion giving bears the upper hand.

Precious Metals: As predicted earlier this week, safe haven demand pushed the price above $1500 handle as high as $1510.38 earlier this week. But lack of strength owing to easing trade war woes and profit booking activities resulted in the pair declining below $1500 handle. But prevalent risk aversion over issues in Europe helps keep price of gold above $1490 handle. Meanwhile Silver remains steady above $16 handle and is trading with positive bias today.

Crude Oil: Crude oil price is trading positive in the global market today with both major international benchmarks Brent and WTI seeing positive activity. While International Energy Association reported that demand growth for crude oil is at lowest level since financial crisis of 2008, influence from draw in US crude oil inventory and expectations of further production and supply cut from OPEC in near future caused crude oil bulls to remain fundamentally supported across today’s trading session so far.

USD/JPY: The pair is trading well in red today as risk aversion in the global market remains high. Demand for safe haven assets/currencies is spiking with each passing day as odds surrounding prolonged trade war and hard Brexit outcome are steadily increasing. USD remains week on decline in US. T.Yields meanwhile Yen is growing stronger. Traders are now awaiting US macro data for directional bias just as the pair is looking to break below $106 handle and enter $105 price level in early European session.

On The Lookout: As trading session comes to close for the week, yet another major event shocked the global market increasing dovish influence from geo-political woes. There are now new/fresh developments in major geo-political events that could influence a bullish breakout in global financial market. Meanwhile, instability in Italian politics following Salvini’s latest move is talk of the market as any further unfavourable developments in Italian politics could cripple European economy significantly. Meanwhile, despite lack of change in status quo surrounding hard Brexit outcome, Jeremy Corbyn is back to forefront again with his efforts to try and prevent Hard Brexit outcome as it seems highly unlikely for Boris Johnson to face a no-confidence vote scenario. In North American market hours today, traders are set to see release of US PPI data, Canadian Building Permits data, Employment change and Unemployment rate data.

Trading Perspective: In Forex market dovish activity is likely to continue but dovish outcome in US macro data could result in USD weakening further, giving major global currencies a small opportunity to reverse some of intra-day losses. US stock and index futures trading in the international market saw dovish activity ahead of US market hours despite yesterday’s session seeing US indices seeing positive activity as geo-political woes greatly affected investor sentiment. US Wall Street is likely to see subdued opening on last trading session of the week amid silent earnings calendar.

EUR/USD: The pair is trading positive in the global market today supported by USD’s weakness driven rally. But gains are capped and price remains well below 1.1200 handle as EURO bulls suffered sharp bearish influence from disappointing EU/UK macro data and Italian Political uncertainties. Traders now await US macro data for short term profit opportunities as trading session comes to close for the week.

GBP/USD: The pair suffered sharp losses today with price hitting new 2-year lows as UK macro data hinted that UK economy took worst hint since 2012 while GBP is already suffering from increasing odds of hard Brexit outcome scenario. The pair is trading above mid-1.20 handle for now but positive outcome in US macro data could lead to pair declining below 1.2050 handle as trading session comes to close for the week.

USD/CAD: The pair is trading flat in the European market hours with bias slightly favouring Canadian Loonie. The commodity linked currency Canadian Loonie is gaining positive momentum today as Crude oil is seeing positive price action in the global market while USD suffers from weak US T.Yields. Traders now await US and Canadian macro data for short term profit opportunities and directional bias as trading session comes to close for the week.

Please feel free to share your thoughts with us in the comments below.

Trade Fears Pause, Dollar Ends Flat, Markets Remain Fragile

by Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: , , , , , , , , ,

Summary: Trade fears took a breather overnight after the PBOC (Chinese central bank) set the midpoint rate (Fix) for the CNY at 7.0039, stronger than expected. A surprise rise in Chinese exports for July added calm and lifted risk sentiment. For now. Early breaking news in Asia from Bloomberg featured a news report that the US has delayed licenses to do business with Huawei after China halted buying of US crops. The Dollar Index (USD/DXY), a popular gauge of the US currency’s value against a basket of foreign currencies slipped to flat at 97.543 following a higher close at 97.63. The safe-haven Yen rallied against the Dollar to 105.87 from a much unchanged close in New York at 106.05. After outperforming overnight on the return in risk, the Aussie and Kiwi eased to 0.6794 (from 0.6804), and 0.6477 (from 0.6482) respectively. The Euro rose modestly to 1.1187 after falling from 1.1225 to 1.1182. Overnight, Italy’s Deputy Prime Minister Matteo Salvini said that there was no way to patch up differences with the ruling coalition and the only was forward was to hold fresh elections. Bond yields steadied for the second day running. The US 10-year rate closed at 1.72% (1.72% yesterday). The Philippine central bank eased interest rates, following the RBNZ, Bank of India and Bank of Thailand. Wall Street stocks erased about half of their overnight gains. The DOW slipped to 26,209 from 26,399 while the S&P 500 was down to 2,918 from 2,941.

Forex Factory - China US Denominated Trade Balance - 09 AUG 2019

Forex Factory – China US Denominated Trade Balance – 09 AUG 2019

China’s Trade Surplus fell in US Dollar terms to USD 45.6 billion from June’s USD 51 billion. Exports climbed to 3.3% from -1.3%, beating forecasts. Imports also outperformed to -5.6% from -7.3%.
US Weekly Unemployment Claims improved to 209,000 from 217,000 the previous week.

– USD/JPY – The Dollar Yen had a less volatile session trading to an overnight high at 106.30 before slipping to close at 106.05. Early breaking news on the US delay on licenses from companies to do business with Huawei pressured the Dollar to 105.80, where it now sits.

  • EUR/USD – The Euro slipped off its highs on the overall stronger Dollar and uncertain Italian politics, closing at 1.1182 from 1.1202 yesterday. The Single currency climbed in early Asia to its current level of 1.1187.
  • AUD/USD – The Aussie outperformed on the back of the better than expected Chinese trade report as well as the stronger PBOC onshore Yuan fix. AUD/USD closed at 0.6805 (0.6760 yesterday). In early Asia, the Aussie Battler eased to 06797.

On the Lookout: Markets remain fragile with the trade dispute between China and the US far from being resolved. Another news agency (One American News Networks – OANN) reported that the White House is considering ending talks with China and imposing other sanctions like halting Chinese student visas and removing Chinese authorities from international agencies if Beijing uses its military to crack down on protests in Hongkong.
RBA Governor Philip Lowe speaks to the House of Representatives Standing Committee on the Economy in Canberra this morning (9.30. am Sydney time).
The RBA releases its Quarterly Monetary Policy Statement at 11.30 am Sydney time today.
Today’s data report sees Chinese CPI and PPI for July. Before that New Zealand’s Visitor Arrivals for July are released. Japan releases its Preliminary Q2 GDP report. European data sees German and Italian Trade Balances and French Industrial Production. The UK releases its GDP (July), Q2 Preliminary GDP, Manufacturing Production, Construction Output and Goods Trade Balance.
Canada’s Employment Report (Employment Change, Jobless Rate) and Housing Starts follow.
The US releases its Headline and Core PPI report (July).

Trading Perspective: Expect further choppy trading given the latest news reports. Traders will keep their eyes on any fresh developments/statements from trade officials (China and the US). Overnight President Trump tweeted that he “is not thrilled with our very strong dollar”.
We could see further short-term US Dollar selling against the Euro and the Yen mainly. The Australian Dollar will be sensitive to the RBA monetary policy statement and Chinese data.

  1. EUR/USD – The overnight range of 1.1180 to 1.1232 should stay intact, albeit in a choppy fashion. EUR/USD had a bid to it after Reuters reported that Germany is considering ditching its balanced budget goal by issuing new debt to finance a costly climate protection package. This u-turn in fiscal policy would arrest falling German interest rates, if implemented. EUR/USD has immediate resistance at 1.1230 followed by 1.1260. Immediate support can be found at 1.1180 and 1.1150. Look to trade a likely range today of 1.1180-1.1230. Prefer to buy dips.
  1. USD/JPY – The Dollar closed little changed versus the Yen in New York at 106.05 before easing this morning on the reports of another build in US-China trade tensions. USD/JPY fell to 105.72 lows in Asia before recovering to settle at 105.84 currently. Immediate support for the Dollar lies at 105.80 followed by 105.50. Immediate resistance lies at 106.00 and 106.30 (overnight high 106.304). Expect Japanese corporates and importers to be on the bid near this morning’s lows. Likely trading range today is 105.70 to 106.70. Prefer to buy dips. 
Daily FX AUD USD Hourly Chart - 09 AUG 2019

Daily FX AUD USD Hourly Chart – 09 AUG 2019

  1. AUD/USD – The Aussie was best performing currency against the US Dollar overnight. The strong climb in Chinese exports and the lower USD/CNH lifted the Australian Dollar to an overnight high at 0.68219 before easing at the close to 0.6805. Asian trading saw the Aussie push down to 0.6778 before rallying to its current 0.6810. Immediate resistance can be found at 0.6820 and 0.6850. Immediate support lies at 0.6780 and 0.6750. Look to buy dips in a likely trading range of 0.6785-0.6815 today.

 

Happy Friday and trading all.

RBNZ Chops Rates 0.5%, Bond Yields Dive Then Climb

by Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: , , , , , , , , , ,

Summary: The RBNZ started the ball rolling and cut its Official Cash Rate by 0.5%, more than expected, to an all-time low of 1.0%. The Bank of Thailand and Bank of India cut rates, raising concerns about the weak global economy. US President Trump called on the Federal Reserve to cut interest rates more in a tweet. Global bond yields plunged then pulled back at the last hour in New York, reversing sharp falls as dealers squared up. Market volumes were lower amidst choppy trade due to the northern hemisphere summer holidays. The benchmark US 10-year bond yield made an impressive comeback to 1.73% (1.72% yesterday) after plummeting to 1.595%, late 2016 lows.

CNBC US 10-Year Bond Yield Chart - 08 AUG 19

CNBC US 10-Year Bond Yield Chart – 08 AUG 19

New Zealand’s Dollar, known by traders as the Kiwi, nosedived to 0.6377 from 0.6525, 3.1/2-year lows before settling at 0.6445. While the Dollar Index (USD/DXY) was little changed at 97.630, it was mixed versus it’s Rivals. The Greenback was lower against the safe-haven Yen (106.22 vs 106.45) and Swiss Franc (0.9755 vs 0.9765). The Euro ended flat at 1.1204 despite weaker German Industrial Production data. The Australian Dollar rebounded to close at 0.6760 (0.6758) after slumping to 0.6677 on the back of the Kiwi’s fall. Yesterday the Dollar gained against the Offshore Chinese Yuan (CNH) to 7.0800 (7.0555).
Wall Street stocks reversed losses to close with modest gains after an initial tumble. The S&P 500 finished at 2,882 (2,878 yesterday) after slumping to 2,824.
The RBNZ cut its Official Cash Rate by 0.5% to 1.00% from 1.50%. Most analysts forecast a 0.25% trim. RBNZ Governor Graeme Orr kept a bearish stance, stating to Parliament that “negative rates are a possibility”. Australian Home Loans slipped -0.9% in July, lower than expected. Germany’s Industrial Production fell to -1.5% in June, much worse than the -0.5% forecast. Germany’s 10-year Bund yield plunged to an all-time low at -0.6% before settling at -0.59%.

  • EUR/USD – The Euro ended little changed at 1.1204 after a choppy session. The Single currency fell to an overnight low at 1.11793 on the dismal German Industrial Production report. EUR/USD jumped to a high at 1.1242 after the initial drop in US bond rates.
  • USD/JPY – The Dollar plunged to 105.494, fresh 2019 lows before settling at 106.24 on the bounce back in the US 10-year yield.
  • AUD/USD – The Australian Dollar had another volatile session, slumping to 0.66768, its lowest since early 2009 after the RBNZ’s move to chop rates. The Aussie then jumped in true Battler fashion on the rebound in risk assets. AUD/USD closed at 0.6760, touching an overnight high at 0.6783.
Daily FX - NZD USD Chart - 08 AUG 2019

Daily FX – NZD USD Chart – 08 AUG 2019

  • NZD/USD – The RBNZ shot the already flightless Bird down after the interest rate chop to 0.63774, near-November 2015 lows. NZD/USD had been sitting at 0.6525 before the move. The Kiwi then rallied with risk to finish at 0.6445, down 1.3%.

On the Lookout: Traders and investors alike will keep their focus on today’s release of China’s Trade data (no scheduled time, normally in early Asian afternoon). Analysts expect China’s July Trade Surplus to narrow to a median CNY 300 billion from June’s CNY 345 billion. In US terms, a surplus of USD 41 billion from USD 50.98 billion. China’s Annual Imports are forecast to have dropped -8.3% from -7.3% in June. Exports are expected at -2.0% from -1.8%.
Japanese Bank Lending, Current Account and Trade Balance as well as Foreign Investment in Japanese stocks and Japanese investment in Foreign Bonds are release prior to the Chinese reports (9.50 am Sydney time).
Euro area sees the release of the ECB’s Economic Bulletin. US Weekly Unemployment Claims and Final Wholesale Inventories round up today’s economic reports.

Trading Perspective: The rebound in stocks and bond yields occurred in thin trading. Easing moves from the RBNZ, Bank of Thailand and Bank of India fed market concerns about the weak global economy. This saw equities and bond yields plummet before mounting a strong comeback. Currencies followed suit and the Dollar Index (USD/DXY) closed much unchanged at 97.63. Expect more volatility as the trade war between China and the US continues to escalate. Traders will also watch the PBOC and their actions today particularly at the CNY Fix. Ranges are being established, albeit wider due to the choppy trade. Which is ideal for FX traders.

  1. EUR/USD – The Euro ended flat at 1.1204 after trading an overnight range between 1.11793 and 1.12419. Immediate resistance lies at 1.1220 followed by 1.1250. Immediate support can be found at 1.1180 and 1.1150. Euro traders await the release of the ECB’s Economic Bulletin, which will provide insight into the ECB Board’s latest thinking on the economy and interest rates. The Economic Bulletin (previously known as the ECB Monthly Bulletin) is published two weeks after the latest Governing Council meeting. Look to trade a likely range today of 1.1190-1.1260.
  2. USD/JPY – The Dollar slumped to 105.494, lows not seen since the flash crash in January this year. The fall in the US 10-year yield to 1.595% weighed heavily on this currency pair. The subsequent bounce saw USD/JPY back up above 106, closing at 106.24. The Yen will continue to attract due to its haven status in the current environment. On the bid side of the Dollar, Japanese corporate (importers) buying on dips and a vigilant BOJ will provide support. Immediate support lies at 106.00 followed by 105.70. Immediate resistance can be found at 106.50 and 106.80. Look to trade in a 105.85-106.85 range. Prefer to buy dips
RBA AUD TWI CHART - 08 AUG 2019

RBA AUD TWI CHART – 08 AUG 2019

  1. AUD/USD – the Australian Dollar had a good bounce after plunging on the back of the Kiwi. The Australian Dollar remains oversold despite the heavy feel about it. In typical Aussie Battler fashion, the currency always feels heaviest when its at or near lows. The opposite applies when it’s bid. We highlighted two factors yesterday. That on a Trade Weighted Index, the Aussie is near decade lows as well. While the RBA has advocated a low currency, the Aussie has reached its lower limits. Speculative short Aussie bets are still at near 12-month highs (-AUD 53,442 contracts as at 30 July). Immediate support for the Aussie lies at 0.6730 and .6700. Strong support can be found at 0.6680. Immediate resistance can be found at 0.6780 followed by 0.6800. Look to buy dips in a 0.6740-0.6790 range.

Happy trading all.

 

Social Media

  • facebook
  • twitter
  • linkedin

Subscribe

Register now to receive the latest news and information for global trading industry.

Copyright © 2019 — The Industry Spread Pty Ltd • All rights reserved. • Privacy Policy • Disclaimer

The information contained on this website is of a general nature only. The information does not constitute advice or a recommendation on any course of action and does not take into account your personal circumstances, financial situation or individual needs. We strongly recommend you to seek independent professional advice or to conduct your own independent research before acting upon any information contained on this website.

Information presented on this website includes but is not limited to those of brokers and technology and service providers. You should be cautious about any information on this website and should consider its source. Various factors, including personal or corporate ownership, may influence the information. The information contained on this website is only as accurate as at the date it was published. References to past performance is no guarantee of future performance.

Please read our Terms and Conditions.

All rights reserved.

This website, and the information which it contains, is the intellectual property of The Industry Spread Pty Ltd (ACN 612 938 360) and its affiliates and licensors, and is protected from unauthorised copying and dissemination by Australian law, international conventions and other intellectual property laws. All The Industry Spread product and service names and logos are owned The Industry Spread Pty Ltd. All other company and product names and logos are trademarks or registered trademarks of their respective owners in certain countries.