October 5, 2016 / 12:12 AM / 10 months ago

IFR Markets ForexWatch Asia Regional Daily Briefing

SYDNEY, Oct 5 (IFR) - Market Briefs
    * ECB said to build taper consensus as QE decision time
nears-BBG

    * Fed hawk Lacker: strong case to hike, preemptive rises
likely needed 

    * Euro zone bond yields, euro jump on report of ECB plan for
QE tapering   

    * Britain should not expect to pre-negotiate on
Brexit-German deputy finmin

    * Britain will minimise Brexit risk to financial
centre-minister 

    * Brazil's Goldfajn says there is no set time frame for rate
cuts 

    * IMF says global growth to stay weak, warns of populist
fallout

    * IMF says sees weaker 2016 growth in U.S. at 1.6 pct

    * Dairy prices fall, volumes drop at auction -NZ's Fonterra

    * Philippine leader tells Obama 'go to hell', says can buy
arms from Russia, China


Macro Themes in Play
    * Markets lower as Fed Dec rate hike odds edge up to
6-in-10, highest in months; ECB talks tapering of bond purchases
just in time for IMF to sharply downgrade prospects for global
trade volume, Euro and Japan bank sectors remain on edge

    * ECB statements aimed at steepening yield curve, attempt to
help banks, same thought process as BOJ, undo damage to
financials from NIRP; problem becomes that EM and spread markets
are priced for easy central bank accommodation well beyond the
horizon

    * Bond yields spike, metals collapse, DXY above 200 dma for
first time since July; commodity market stable but vulnerable

    * EUR saved at 200 dma by ECB statements; USDJPY up on US
rates, Nikkei futures teasing through 200 dma, sustained break
would be good for long USDJPY trade; Cable still finding no
buyers despite second day of big data 

    * AUD, CAD, MXN lower, nervous that commodity rally could
fall apart with higher rates/USD; EEM breaks hard


Looking Ahead - Economic Data (GMT)
    * 22:30  AU  AIG Services Index  Sep  45-prev

    * 00:30  AU  Retail Sales MM     Aug  0.20%  f/c,  0.00%
-prev    


Looking Ahead - Events, Other Releases (GMT)
    * No significant events


Currency Summaries
EUR/USD  
    * Heavy in Europe's morning as pair dragged lower with
GBP/USD, NY opens near 1.1175

    * Bear pressure persists in early NY as USD bid intensifies,
pair drops to 1.1138 low

    * BBG story citing ECB sources on tapering scenarios leads
to sharp spike higher

    * Shorts scramble to cover and 1.1240 is neared, USD bids
remains resilient though

    * Pair dips near 1.1180 before ending the day just above
1.1200

    * Pair remains stuck within broad range, likely to do so
until jobs report on Friday

    * EZ Sep Markit Services PMI & US Sep ISM non-Mfg PMI are
data risks tomorrow

 
USD/JPY 
    * O/N buy-stop run above 21-DMA & Kijun claimed Sep 21
CB-day high in NY

    * Sep 21's 102.79 high cleared, but 103 holding so far &
Cloud top @103.25

    * JPY weaker across-the-board as USD firms on hopes of Fed
tightening

    * Key US ISM non-mfg & ADP on tap Wed to set tone into Fri's
jobs report

    * Oil a shade softer, but recent rise is seen as USD/JPY
friendly

    * EUR/JPY rallied most of the way thru Cloud cover on ECB
taper talk (bbg)

    * Cross hasn't closed above its Cloud in a year, so a major
trend marker

    * GBP & JPY weakness was offsetting AUD/JPY above 100-DMA

    * JP Sep Nikkei Services PMI out Wed after a 50.4 Mfg result

 
USD/CHF
    * EUR/CHF is rapidly closing the gap on Sep's 1.1000 high
(Jun's at 1.1010)

    * Fresh legs for the rebound begun on Fri from Bbg story on
ECB tapering

    * A close above 1.10 & the '16 dn TL at 1.103s is needed to
target 1.12 again

    * USD/CHF riding broad USD buying past the 200-DMA & mid-Sep
highs

    * Close to 200-DMA at 0.9798 heading into the NY close

    * Bulls watching key US data Wed ahead of Fri's jobs report

 
GBP/USD   
    * EUR/GBP got an extra boost to 0.8802 on ECB tapering story
(Bbg)

    * That high is by the top of the rising channel off July &
Sep lows

    * Hard to fight the hard-Brexit trend, but if 0.88 holds
again, may get pullback

    * UBS reiterates its EUR/GBP 1.00 forecast "for the end of
2017"

    * Feb 2013 peak at 0.8815 is the next historical hurdle

    * Cable's post-Brexit low break to new 31-yr lows is probing
channel support

    * The dn channel off Sep's high is at 1.2714 today & 1.2690
on Wed

    * Street looking for 1.2500 as a nice round next target

    * Today's UK Const PMI beat dismissed like many other beats
of late

    * UK Markit Services & Composite PMIs out Wed


 
USD/CAD
    * USD/CAD 1.3114/74, Noram 1.3146/3215, close 1.3198 (NY +37
pips)

    * Hawkish Fed comments hit stocks and undermined risk
appetite 

    * S&P -0.6% (-0.65% NY) Oil -0.5/-0.25% (WTI/Brent) in
choppy trade 

    * DXY +0.44% (-0.11% NY); UST/CA 2Y sprd +0.3bp, 26.65; Gold
-USD40 oz (-3.0%)

    * CAD/JPY +0.56%, 77.90, AUD/CAD -0.12%, 1.0050; EUR/CAD
1.4775 +0.46% 

    * Wed-Cda trade, exports in focus, US trade, ADP, factory
ords Svc ISM [page:2417]

 
AUD/USD     
    * Europe lifts pair from 10-DMA, NY opens near 0.7670, bear
pressure early

    * Steady slide sees 10-DMA neared again, MA breaks & slide
accelerates

    * Slide aided by intensified USD bid & sharp drop in NZD/USD

    * Pair probes 0.7600/10 support before small bounce above
0.7220

    * Techs favoring bears, bearish outside candle on daily
chart & RSIs biased down

    * Oz August retail sales a data risk, if weak today's slide
likely extends


NZD/USD
    * Europe consolidates losses from Asia, NY opens near 0.7285

    * Bear pressure early on broad based USD bid, pair slips
below the 10-DMA

    * Fonterra results GDT PI -3.0% & WMP -3.8%, volumes sold
drops again

    * Pair's slide accelerates sharply, not let up seen, 55-DMA
& daily clout top cleared

    * Spike up in EUR/NZD helps pair fall further, 0.7200/20
support cleared & 0.7198 hit

    * Late day USD give back allows a small bounce, near 0.7210
late in the day

    * No NZ data due, OZ retail sales might impact via AUD/NZD

 
LATAM
    * USD/MXN, NY very choppy 19.3900/ 19.1550 / 19.3500, close
19.3250

    * Oil prices were volatile, opened weak but rebounded, MXN
tracked the DXY

    * S&P -0.7%, risk aversion spiked & the DXY closed +0.47%
(NY -0.08%)

    * USD/BRL -1.4% to 3.2540 by NY close; Bovespa -0.77% BR
bond yields up

    * BcB  sold 5k rev. swaps; BRL down on I.P. Fed
talk 

    * USD/CLP ends NorAm 663.50, -0.56% with copper -1.14%
 

 
USD/JPY shorts may be squeezed if oil lifts US econ
USD/JPY's 21% drop from June '15 to June '16 imported deflation
to Japan, bolstered by falling oil prices However, WTI's pending
long-term inverted H&S pattern may bode well for the US economy,
stocks and Tsy yields, and poorly for the JPY, as imported
energy-led inflation reduces real JGB yields now that the BOJ's
put a hold on nominal ones with yield curve control. Both US
presidential candidates want fiscal stimulus (more room for Fed
hikes) and Japan is ramping up spending to fight deflation. Near
historic highs in net spec short USD/JPY positions make a
squeeze a threat if oil prices trend up from here. USD/JPY
hasn't made a new low since June, allowing oversold monthly Slow
Stochs to bottom. Real 2-yr spreads bottomed in January and US
and Japanese fiscal stimulus prospects should allow the Fed to
tighten and dampen Japan's deflation.

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