Market Roundup
- USD/JPY +0.5%, EUR/USD -0.2%, GBP/USD +0.20%
- DXY +0.02%, DAX +0.30%, Brent -2.35%, Iron +1.40%
- Gold -0.5%, AUD/USD -0.20%, NZD/USD -0.35%, USD/ZAR +0.65%
- Swiss sight depos rise, both domestic and total w/e Aug 19
- Fed ViceChair Fischer – Close to full employment, 2% inflation targets
- BoJ Gov kuroda – Won’t rule out deepening negative rate cut – Sankei
- Japanese banks face US CP market-induced squeeze – IFR
- Japan’s Renesas in talks to buy US chipmaker Intersil, $3 bln deal – Nikkei
- Japan Teijin taking over DuPont stakes in Japan, Indonesia ventures – Nikkei
- China Citic unit plans Japan private equity fund as China buying jumps – BBG
- Typhoon hits Kanto area, dulls first, post-O-Bon summer holiday Tokyo trade
Key Events Ahead
- (0745 ET/1145 GMT) FedTrade ops 30-yr Fannie Mae / Freddie Mac max $2.075 bln
Economic Data Ahead
- (0830 ET/1230 GMT) Federal Reserve Bank of Chicago will release its Chicago Fed National Activity Index (CFNAI) for the month of July.
- (0830 ET/1230 GMT) Statistics Canada is expected to reports that wholesale trade rose to 0.5 percent in June, after gaining 1.8 percent in May.
- (1000 ET/1400 GMT) Mexico releases data on its gross domestic product (GDP) growth in the second quarter, after preliminary figures showed a contraction due to a decline in industrial output and a stagnant services sector.
- (1000 ET/1400 GMT) The Conference Board Australia releases its Leading Indicator for the month of August. The index was at 0.1 percent in the prior month.
FX Beat
DXY: The dollar index, against a basket of currencies trades 0.2 percent higher at 94.67, pulling away from a 6-week low hit last week following FOMC minutes release.
EUR/USD: The euro slumped, pulling away from an 8-week high of 1.3663 touched last week. The major trimmed some of earlier losses against the greenback, however, it failed to take out the 1.1300 handle. The dollar continued to gain after US Fed rate hike speculation gathered steam following hawkish comments from Fed’s Vice Chairman Stanley Fischer over the weekend. The major resistance is around 1.1370 and any minor bullishness is only above that level. Any violation above will take the pair to next immediate resistance at 1.14300/1.14500 in the short term. On the lower side major support is around 1.12684 (23.6% retracement of 109554 and 1.13663) and any break below targets 1.1220 (100 DMA)/1.1750
USD/JPY: The Japanese yen recovered some ground after going as low as 100.93, however, the gains were capped as the dollar strengthened on expectations the Federal Reserve will raise interest rates in near term. The major was also supported by Kuroda’s comments which cited that the BoJ may deliver more monetary stimulus to the economy, if necessary, at its next policy meeting in September. The pair trades 0.3 percent higher at 100.48, having touched an early low of 100.28. The short term trend is slightly bearish as long as resistance100.90 (daily Tenken-Sen) holds. The major resistance is around 100.90 and any break above confirms minor trend reversal, a jump till 102/102.65/103.80 is possible. On the lower side, major support is around 99.50 and any break below 99.50 will drag the pair till 98.
GBP/USD: Sterling edged up, hovering away from a low of 1.3022 touched in the previous session, as a run of robust economic data suggested Britain's economy was faring better than expected following its Brexit fallout. The major was strengthened last week following upbeat inflation and retail sales numbers, suggesting that there has been little immediate impact on consumer from the Brexit vote. Sterling rose 0.1 percent to 1.3089, having gained 1.2 percent last week. It should close below 1.3012 (10 –DMA) for major weakness. Any break below 1.3100 will drag the pair till 1.2960/1.2855. On the higher side, it should break above 1.3185 and any comfortable break above that level will take the pair to next level till 1.3310 (23.6% retracement of 1.51086 and 1.27893). Against the euro, the pound trades 0.4 percent up at 86.26 pence.
USD/CHF: The Swiss franc extended gains, as the greenback strengthened against its major peers after U.S. Fed officials comments revived expectations of U.S. interest rate hike. The dollar trades 0.3 percent higher at 0.9633, pulling further away from a 7-week low of 0.7537, touched last week. On the lower side, major support is around 0.9520 and any violation below 0.9520 will drag the pair down till 0.9500/0.94450.the minor support is around 0.9580. The minor resistance is around 0.9650 and any break above targets 0.9680/0.9730/0.9770.The pair should close above 0.9845 (200 DMA) for further bullishness.
AUD/USD: The Australian dollar pulled away from a near 3-week low of 0.7583, but hovered around the 0.7600 handle as the dollar recovered across the broad. Last week's hawkish comments from Fed policymakers have revived hopes of an eventual Fed rate-hike this year, which has been the key factor driving the US Dollar higher since the end of last week. The Aussie trades 0.2 percent up at 0.7607, attempting to sustain gains above the 0.7600 level. On the higher side any break above 0.7760 will take the pair till 0.7800/0.7840. The major support is around 0.7575 and break below will drag the pair till 0.7535/0.7480.
NZD/USD: The New Zealand dollar retreated, after declining to a 4-day low of 0.7209 earlier in the session. The recovery comes in as the FOMC minutes released last week were in contrast to the hawkish commentary from some Fed officials. The Kiwi trades 0.2 percent down at 0.7252, attempting to close out the bearish gap. Immediate resistance is located at 0.7290, break above would take it over 0.7300. On the lower side, support is seen at 0.7200, break below targets 0.7164.
Equities Recap
World shares recovered from early lows following a bounce-back in European shares, after Syngenta's proposed takeover by ChemChina was approved by U.S. regulators.
The pan-European STOXX 600 index declined 0.4 percent at 341.39 points, while the FTSEurofirst 300 index added 0.3 percent at 1,343.53 points.
Britain's FTSE 100 trades 0.5 percent down at 6,824.76 points, while mid-cap FTSE 250 index edged down 0.1 pct at 17,850.15 points.
Germany's DAX gained 0.3 percent at 10,578.67 points; France's CAC 40 trades 0.3 percent higher 4,414.54 points.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.2 percent, having lost 0.3 percent last week.
Tokyo's Nikkei rose 0.32 pct at 16,598.19, Australia's S&P/ASX 200 index shed 0.27 pct at 5,511.90 points and South Korea's KOSPI lost 0.7 percent down at 2,042.16 points.
Shanghai composite index dropped 0.7 pct at 3,084.81 points, while CSI300 index slumped 0.8 pct at 3,336.79 points. Hong Kong's Hang Seng index added 0.3 pct at 22,997.91 points.
Commodities Recap
Crude oil prices declined back below $50 a barrel mark, as investors raised concerns over the upcoming producer meeting would facilitate in reducing oversupply. International Brent crude oil was trading down 2.3 percent at $49.67 per barrel at 0957 GMT, pulling away from a peak of $50.19 a barrel, a level last seen since June 22. U.S. West Texas Intermediate crude was at $47.68 a barrel, down 1.73 percent
Gold fell to its lowest in nearly 2-weeks as the dollar rose following comments from U.S. Federal Reserve officials spurred expectations of a U.S. rate hike this year. Spot gold was down 0.4 percent at $1,333.08 an ounce as of 1002 GMT, after touching a low of $1,331.67, a level not seen since Aug. 9. U.S. gold dropped 0.7 percent to $1,337.20 an ounce.
Treasuries Recap
The US Treasuries saw downward pressure across the curve during a relatively quiet Monday session light on significant economic data. The yield on the benchmark 10-year Treasury note rose 1/2 basis point to 1.581 percent, the yield on 5-year note climbed nearly 2 basis points at 1.177 percent and the yield on short-term 2-year note also bounced 1-1/2 basis points at 0.762 percent.
The UK gilts strengthened as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil. Also, disappointing fiscal coffers in July encouraged investors for safe-haven buying. The yield on the benchmark 10-year gilts fell 3-1/2 basis points to 0.586 percent, the super-long 40-year bond yield dipped 3 basis points to 1.205 percent and the yield on short-long 2-year bond slid 2-1/2 basis points to 0.134 percent.
The German bunds gained as crude oil prices fell below $50 a barrel following news that Iraq will increase crude exports. The yield on the benchmark 10-year bond fell 2 basis points to -0.056 percent, the yield on long-term 30-year note dipped 2-1/2 basis points to 0.447 percent and the yield on short-term 2-year bond slid ½ basis point to -0.615 percent.
The Japanese government bonds remained marginally lower as trading activity remained quiet with no major economic data or reports expected throughout the day. The benchmark 10-year bond yield rose 1 basis point to -0.073 percent, the super-long 30-year JGB yield jumped 1-1/2 basis points to 0.352 percent and the short-term 2-year JGB yield bounced 1/2 basis point to -0.200 percent.
The New Zealand bonds closed marginally weaker as investors drove out from safe-haven buying after US Fed rate hike speculation gathered steam following hawkish comments from the Fed policymakers. The yield on the benchmark 10-year bond increased 1/2 basis point to 2.315 percent and the yield on 7-year note also closed ½ basis point higher at 1.985 percent and the yield on short-term 2-year note bounced 1/2 basis point to 1.810 percent.
The Australian government bonds slumped Monday, following hawkish remarks made by the Federal Reserve officials, which boosted chances of an interest rate hike in 2016. The yield on the benchmark 10-year Treasury note rose 4 basis points to 1.972 percent and the yield on short-term 2-year also jumped 4 basis points to 1.467 percent.
