May 26, 2016 / 12:22 AM / in a year

IFR Markets ForexWatch Asia Regional Daily Briefing

SYDNEY, May 26 (IFR) - Market Briefs  
    * US advance April goods trade balance -58b vs -57b in March
    * US monthly home price +0.7% m/m, +6.1% y/y
    * U.S. Markit flash services index down from April (51.2 v 52.8); new orders
51.7 vs 52.2 in April
    * Goldman raises U.S. Q2 GDP to 3% from 2.7% after April advance trade data
    * Fed's Kashkari: negative interest rates 'perverse', could scare people
work against policy objectives
    * Fed's Kaplan: sees two U.S. rate hikes this year, Brexit will weigh on Fed
decision
    * EXCLUSIVE-EU launches contingency talks for Brexit vote (sources)
    * ECB's Knot: ECB stimulus reaching its limits
    * ECB's Praet: CB needs to maintain sub-zero rates
    * Crude oil inventories slump, most since Apr, imports fall; gas stocks
soared ahead of Summer driving season 
    * Reuters Poll: ECB should not consider "helicopter money"- 50/55
economists; ECB not likely to ease again in '16- 35/61 economists

 
Macro Themes in Play
Stocks rally big for second day behind Europe as risk premia continues to peel
off, peripheral bonds strong on Greek relief trade, DAX above 200 dma for first
time in a month
DXY eases back after US rates stall on Markit PMI miss, June hike odds steady at
about 4-in-10; German IFO beat helps lift EUR; USDJPY up with stocks but still
unimpressive; screws keep turning on GBP shorts, matches 2016 highs
AUD, CAD modestly better with commodities; BOC on hold as oil prints new highs;
EMFX stays offered after CNY set at 5 yr lows
 
Looking Ahead - Economic Data (GMT)
    * 23:30  JP Reuters Tankan DI                  May  10.00-prev
    * 23:50  JP Foreign Bond Investment            w/e  1121.8b-prev
    * 23:50  JP Foreign Invest JP Stock            w/e  71.7b-prev
    * 01:30  AU Capital Expenditure*               Q1   f/c -3%, 0.80%-prev
    * 01:30  AU Building Capex*                    Q1   f/c -3%, 1.20%-prev
    * 01:30  AU Plant/Machinery Capex              Q1   f/c -2%, 0.10%-prev

Looking Ahead - Events, Other Releases (GMT)
    * 09:15  SG  US FRB St. Louis President James Bullard gives Singapore City
Lecture on the U.S. economy and monetary policy before the Official Monetary and
Financial Institution Forum    

Currency Summaries
EUR/USD 
    * Tight range in Europe's morning, holds 1.1140/60, NY opens mid-range
    * Limited action early on, slight lift  toward day's high takes hold but
reverses
    * Sharp USD rally sees pair hit new trend low of 1.1129, USD bid fades &
turns
    * 1.1170 neared, little pullback seen as USD stays heavy, near 1.1165 late
    * Daily techs warn bears, RSI diverges on new low & pair up after new low
set
    * Second tier data in EZ, mkt focused on US durable goods & Bullard tomorrow

 
USD/JPY
    * USD/JPY again cleared the 55-DMA, dn TL fm Mar & 76.4% hurdles today
    * What it's yet to do is close above those thing or the 110.59 May peak
    * Mixed US data were not up to the task, particularly Markit Services ISM
    * Regardless, today's range was inside the 109.74-111.44 Daily Cloud
    * Recent up TL support rises to 109.40 Thur
    * Another up day in stocks & oil kept the JPY generally offers
    * GBP/JPY's daily Cloud B/O also pierced the inverted H&S neckline (polls)
    * EUR/JPY and CAD/JPY snapped early-week losses (BOC a +)
    * JPY Corporate Services Prices & weekly Investment flows are to tonight 

 
GBP/USD
    * GBP/USD made little work of resistance at 1.4663 May 19 high, on way to
1.4730 high
    * Upper 30-d Bolli 1.4729 holds, further res 1.4770 May 3 high, 200-DMA
1.4781 caps
    * Reduced Brexit fears and commodity strength aided broad risk
rally 
    * Paddy Power shortening Bremain odds to 1/7; See: 
    * EUR/GBP dropped to new 3.5 mos low, ECB's Praet sees neg rates lingering
    * Pair ends NY 0.7582 off session low by 0.7564, diverging UK/EZ rate
outlook favors GBP
    * UK releases Q1 GDP 2nd release, y/y Rtrs f/c +2.1%

 
USD/CHF
    * USD/CHF held below Tues.'s 0.9937 high & slipped on soft US Markit data 
    * Still just an inside day within the .9894-937 Tues range for an O/B market
    * Swiss May ZEW was 17.5 vs 11.5 in Apr; German Ifo also above f/c
    * Another good day for risk in US & Europe (Greek deal helped) 
    * EUR/CHF rallied with EUR/USD after the US Markit Services miss
    * But that came after its 3-day slide broke the Apr-May  up TL & 21-DMA
    * Close below the 21-DMA at 1.1051 would bolster the O/B top pattern
    * SNB still seen lurking to lap up lower levels, particularly by 1.10
    * Swiss Q1 IP is out Thursday - fell 4.5% y/y in Q4
    * US Durables, Claims & Pending Homes Sales also out Thursday

 
USD/CAD  
    * O/N range 1.3087/3131,Noram range 1.3025/3133, Close 1.3034, NY -78 pts
    * Brent crude +2.6%, WTI +2.1%, Alum -0.8%, copper +1.76%, gold -0.18%
    * AUD/CAD -0.47%, 0.9380, CAD/JPY +0.74%, 84.45, EUR/CAD -0.47%, 1.4548
    * DXY -0.2% (-0.17% in NY) US stocks +0.63/0.88% - strong US bldg permits
    * UST/CA 2Yr spread "unch", +28.1 bp. Markit PMIs soft [page:2417]
    * BoC meet less dovish than thought. Thur- US data slew incl durable goods

 
AUD/USD  
    * Overnight lift matches may 24 high, slide ensues as USD goes bid
    * NY opens near 0.7205, slide deepens as USD rise extends & AU-US spreads
tighten
    * Asia low neared but bounce takes hold as USD bid fades, pair lifts near
0.7200 late
    * Daily techs suggest consolidation, L-T charts remain bearish & say lower
still
    * Aus Q1 CAPEX due, f/c -3.0% prior +0.8%, if below f/c AUD likely turns
heavy again

 
NZD/USD  
Europe lifts pair off 0.6735/40 support zone, NY opens near 0.6765
Broad based USD bid sees pair decline and dip below 0.6750
USD bid fades and slides from highs, NZD/USD lifts near day's high late
NZ H2 OBEGAL forecast due in Asia, econ forecasts & econ risks to be noted
Techs favor bears, pair below 10-DMA & daily cloud, monthly RSI biased down
 
LATAM
    * USD/MXN reversed early NorAm weakness, rallied off low 18.3175
    * Support bends but holds by 10-DMA 18.3369, below eyes daily cloud top
(18.2743)
    * Mexico's QIR report adds to USD bid, growth remains weak, inflation steady
    * Banxico will continue to watch MXN weakness for passthrough to inflation
    * USD/BRL rose 0.87% to end NY at 3.60, growth challenges in focus
    * Brazil loan defaults 5.7% of o/s loans, Brazil's Franco: Tsy can no longer
subsidize BNDES
    * USD/CLP holds on to early losses ends NorAm -0.52% at 691.50, copper
+1.74%

Greek debt deal: devil is in the detail
Greece and its EU lenders have spared markets another angst-filled summer with
the successful conclusion of debt deal talks. Investor relief that Grexit is off
the radar, at least for some months, has driven Greek bond yields to 6-mth lows
and taken peripheral debt yields with them in the downdraft. The IMF's agreement
to join the bailout has been hailed as the big breakthrough after the EU spelt
out debt relief terms. IMF participation is, however, far from
assured. The board has to assess whether the debt measures would deliver
"necessary debt relief", which will only be considered in 2018 if Athens meets
bailout conditions. Herein lies the problem: implementation risks remain high.
PM Tsipras' small parliamentary majority and public discontent with more
austerity could jeopardize the tenuous stability. Thus the 6-yr Greek drama may
come back to haunt markets yet again.

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