Market Roundup:
- Yen surges as trade war intensifies
- Gold touches over 6-year peak on risk-off appetite
- Oil eases as trade war raises recession fears
Economic Data Ahead
- (0400 ET/0800 GMT) German IFO- Expectations August
- (0400 ET/0800 GMT) German IFO- Business Climate August
- (0400 ET/0800 GMT) German IFO- Current Assessment August
Key Events Ahead
- No Significant Events Scheduled
FX Beat
DXY: The dollar index steadied after falling tumbling to a 2-week low in the previous session as yields on benchmark 10-year Treasury debt dropped to their lowest since mid-2016. The greenback against a basket of currencies traded 0.4 percent up at 97.68, having touched a low of 97.17 on Friday, its lowest since August 9.
EUR/USD: The euro surged to a 1-1/2 week peak, as the greenback plunged across the board following the announcement of new tariffs in the escalating U.S.-China trade war. However, the upside in the major was limited amid speculation the European Central Bank will have to ease aggressively next month. The European currency traded 0.4 percent up at 1.1144, having touched a high of 1.1163 earlier, its highest since August 14. Investors’ attention will remain on German IFO survey, ahead of the U.S. durable goods orders. Immediate resistance is located at 1.1192 (78.6% retracement of 1.1230 and 1.1060, a break above targets 1.1230 (August 12 High). On the downside, support is seen at 1.1119 (10-DMA), a break below could drag it below 1.1095 (5-DMA).
USD/JPY: The dollar plunged to a near 3-year low after U.S. President Donald Trump, on Friday, announced a 5 percent additional duty on $550 billion in targeted Chinese goods, hours after China unveiled retaliatory tariffs on $75 billion worth of U.S. products. Additionally, Trump urged some of the U.S. companies to leave China. The major was trading flat at 105.31, having hit a low of 104.44 earlier, its lowest since November 2016. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. durable goods orders. Immediate resistance is located at 106.16 (10-DMA), a break above targets 106.70 (21-DMA). On the downside, support is seen at 104.30 , a break below could take it lower at 104.00.
GBP/USD: Sterling edged lower from a near 4-week peak on news that the UK Prime Minister Boris Johnson’s office has sought legal advice from the attorney-general Geoffrey Cox about the possibility of shutting down parliament from September. The major traded 0.1 percent down at 1.2269, having hit a high of 1.2293 on Friday, it’s highest since July 29. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2331 (61.8% retracement of 1.2522 and 1.2079), a break above could take it near 1.2417 (78.6% retracement). On the downside, support is seen at 1.2188 (5-DMA), a break below targets 1.2134 (10-DMA). Against the euro, the pound was trading 0.2 percent down at 90.81 pence, having hit a high of 90.28 on Thursday, it’s highest since July 29.
AUD/USD: The Australian dollar slumped to a 2-1/2 week low after China announced tariffs on $75 billion of US goods while Trump responded by promising another 5 percent on all $550 billion Chinese imports. The Aussie trades 0.3 percent down at 0.6730, having hit a low of 0.6689 earlier, it’s lowest since August 7. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6677 (August 7 Low), a break below targets 0.6630. On the upside, resistance is located at 0.6766 (10-DMA), a break above could take it near 0.6792 (21-DMA).
NZD/USD: The New Zealand dollar tumbled to multi-year lows, after the US President Trump mentioned that 10 percent levy on $300 billion of Chinese goods would be raised to 15 percent from September 01 (and December 15 in some cases) and the existing 25 percent levy on $250 billion of Chinese goods would lift to 30 percent from October 01. The Kiwi trades 0.3 percent down at 0.6377, having touched a low of 0.6340 earlier, its lowest level September 2015. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6436 (38.2% retracement of 0.6590 and 0.6340), a break above could take it near 0.6465 (50.0% retracement). On the downside, support is seen at 0.6333, a break below could drag it below 0.6300.
Equities Recap
Asian shares plunged as the latest salvo in the U.S.-China trade war weakened investor sentiment and sent them steaming to the safe harbors of sovereign bonds and gold.
MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 2.0 percent
Tokyo's Nikkei slumped 2.2 percent to 20,264.60 points, Australia's S&P/ASX 200 index declined 1.3 percent to 6,440.10 points and South Korea's KOSPI eased 1.5 percent to 1,917.88 points.
Shanghai composite index fell 1.4 percent to 2,857.90 points, while CSI 300 index traded 1.7 percent down at 3,757.23 points.
Hong Kong’s Hang Seng traded 2.9 percent lower at 25,388.08 points. Taiwan shares shed 1.8 percent to 10,354.57 points.
Commodities Recap
Crude oil prices declined, extending losses for the third straight session, as an intensifying U.S.-China trade war weakened confidence in the global economy. International benchmark Brent crude was trading 0.6 percent lower at $58.72 per barrel by 0422 GMT, having hit a low of $58.29 on Friday, its lowest since August 16. U.S. West Texas Intermediate was trading 0.6 percent down at $53.32 a barrel, after falling as low as $52.95 earlier, its lowest since August 9.
Gold prices rallied to a fresh 6-year high as the announcement of new tariffs in the escalating U.S.-China trade war sent investors rushing for safe-haven assets. Spot gold rose 1.1 percent to $1,541.65 per ounce by 0428 GMT, having touched a high of $1,555.10 earlier, its highest since August 2013. U.S. gold futures were up 1.1 percent at $1,554.90 an ounce.
Treasuries Recap
The U.S. bond yields plunged in Asia, with the 10-year Treasuries yield dropping 7 basis points to 1.451 percent, its lowest in three years. The U.S. yield curve is inverted, with the 10-year yield slipping below the two-year yield, which also fell 7 basis points to 1.453 percent.
The Japanese government bond prices shot up after a sharp escalation in U.S.-China trade tensions. The Benchmark 10-year JGB futures price rose as much as 0.51 point to 155.37, hitting a record high. The 10-year JGB yield fell 4.5 basis points to minus 0.285 percent, near the record low of minus 0.30 percent hit in 2016. The 20-year JGB yield fell 5.5 basis points to 0.045 percent, matching a three-year low touched earlier this month, while the 30-year JGB yield fell 5.5 basis points to 0.150 percent. The two-year JGB yield fell 2 basis points to minus 0.320 percent, while the five-year yield fell 3 basis points to minus 0.360 percent.
The Australian government bond yields plummeted during Asian session of the first trading day of the week as fears of a global economic recession continued to cloud investors’ risk appetite. Also, Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday did little to help the debt market. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 2 basis points to 0.889 percent, the yield on the long-term 30-year bond slumped 7 basis points to 1.531 percent and the yield on short-term 2-year plummeted 6 basis points to 0.699 percent.
