Market Roundup
- Slow start to week as Holidays reduce Monday interest
- EUR/USD -0.01%, USD/JPY +0.23%, GBP/USD-0.07%, AUD/USD +0.3%
- DXY +0.02%, FTSE -0.35%, Brent +2.0%, Iron +0.4%, Gold +0.7%
- Whit Monday holiday France, Germany, Switzerland, Austria, Norway
- Japan PM Abe – Majority of G7 leaders agree on need for fiscal steps
- German FinMin Schaeuble – No request from Japan to boost fiscal stimulus
- Canada off’l – Risks to world economy to be focus for G7 FinMins
- BoE Gov Carney – Didn’t overstep on Brexit, negative rates highly unlikely – BBC
- Japan’s Abe to put off next April sales tax hike again – Nikkei exclusive
- MoF Asakawa: FX policy not restricted by US Treasury report
- MOF, FSA, BOJ hold 3rd regular meetings to discuss financial markets
- Fiscal constraints mean BoJ likely to keep helicopter grounded
- Japan’s MUFG top lender to energy industry, Y10.4 trln credit lines – Nikkei
- Massive yen headwind hits Japanese car makers as R&D needs grow
- PBOC – No change in policy after April loans miss expectations
- China April industrial output +0.47% m/m, +6.0% y/y, +6.5% y/y eyed
Economic Data Ahead
- (0830 ET/1230 GMT) The Federal Reserve Bank of New York is expected to report that manufacturing activity in New York State have dropped to 6.50 in May from 9.56 in April.
- (1000 ET/1400 GMT) The National Association of Home Builders is likely to report that its Housing Market index have increased to 59 in May from 58 in prior month.
- (1030 ET/1430 GMT) The Bank of Canada will release its biannual publication featuring articles related to the economy and central banking.
- (1600 ET/2000 GMT) The U.S. Treasury department releases data on capital flows for the month of March.
Key Events Ahead
- (1900 ET/2300 GMT) Minneapolis Fed President Neel Kashkari participates in an evening town hall on “Ending too big to fail” in Minneapolis.
- N/A Former Federal Reserve Chairman Ben Bernanke participates in “Panel 2: Enhancements/Alternatives to DFA Resolution”
FX Beat
USD: The dollar index, against a basket of currencies, trades 0.1 percent lower at 94.520, pulling away from a 2-week high, touched on Friday.
EUR/USD: The euro gained 0.1 percent to trade at 1.1318, pulling away from a low of 1.1282 struck in the previous session. after declining from a high of 1.1379 hit in the previous session. The major made an intra-day high 1.1330 and a low of 1.1301. The short term trend is slightly bullish as long as support 1.12500 holds. Any break below 1.1250 will drag the pair till 1.1200/1.11500. On the higher side minor resistance is around 1.13370 and any break above targets 1.1365 (200 day 4H MA)/1.1400/1.1450 level. Overall bearish invalidation only above 1.16200.
USD/JPY: The Japanese yen eased, erasing early gains made on downbeat Chinese data, as Japan stepped up its threat of intervention in the currency market ahead the G7 meeting it will host this week. The greenback trades 0.2 percent higher at 108.90, hovering towards sessions high of 108.98. Minor weakness can be seen only below 108 levels. Any break below 108.40 will drag the pair down till 108/107.45 (Tenken-Sen)/106.99 (61.8% retracement of 105.54 and 109.36). On the higher side major resistance is around 109.50 and any indicative break above targets 110/110.75.
GBP/USD: Sterling recovered from a near 3-week low as comments by leading Brexit campaigner Boris Johnson weighed down on Britain's membership of the European Union. Sterling trades 0.1 percent higher at 1.4366, after hitting an early 3-week low of 1.4332. Against the euro, the pound trades at 0.1 percent lower at 78.80 pence. On the lower side any break below 1.4365 will drag the pair down till 1.4300/1.4270. The minor resistance is around 1.4400 (4H Tenken-Sen) and any break above targets 1.4450/1.4530 level. Overall bearish invalidation is only above 1.4600.
USD/CHF: The Swiss franc extended losses against the dollar, trading 0.1 percent lower at 0.9763, pulling closer to a low of 0.9773 stuck in the previous session. The short term trend is slightly bearish as long as resistance 0.9800 holds. On the higher side any break above 0.9800 will take the pair to next level till 0.9800/0.9850. The short term trend reversal only above 0.9800. Any violation below 0.9720 will drag the pair down till 0.9680/0.9630.
AUD/USD: The Australian dollar recovered to trade 0.3 percent higher at 0.7290 after declining to a low of 0.7244 earlier in the session. The Aussie slumped to its lowest in two-and-a-half months on the back of weak Chinese economic data and declining iron ore prices. The short term trend is slightly bearish as long as resistance 0.7325 (4 H Kijun-Sen) holds. On the higher side major resistance is around 0.7325 and break above targets 0.7350/0.7380/0.7410. The minor resistance is around 0.7300, while the major support is around 0.7250 and break below will drag the pair till 0.7200/0.710.
NZD/USD: The New Zealand dollar trades 0.5 percent higher at 0.6797, pulling away from an early low of 0.6746. The kiwi halted its downside momentum and rose to a high of 0.6802 as investors sentiments were strengthened after the oil prices advanced to their higher level since October 2015. Immediate resistance is located at 0.6822 (10-DMA), break above could take the pair to 0.6830. On the downside, support is seen at 0.6746 (Session Low).
Equities Recap
European shares declined in subdued trade, failing to maintain the momentum of Asian stocks that shrugged off sub-par Chinese economic data to make modest gains.
The pan-European FTSEurofirst 300 share index fell 0.5 percent, Britain's FTSE 100 dipped 0.3 percent and France's CAC was down 0.7 pct.
Tokyo's Nikkei gained 0.33 pct at 16,466.40, Australia's S&P/ASX 200 index climbed 0.57 pct at 5,359.40 points. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent.
Shanghai composite index advanced 0.8 pct at 2,850.86 points, while CSI300 index soared 0.7 pct at 3,095.31 points. HK’s Hang Seng index added 0.8 pct at 19,883.95 points.
Commodities Recap
Oil prices advanced over 2 percent, hitting their highest since October 2015 on growing Nigerian oil output disruptions and after Goldman Sachs stated that the market had ended almost two years of oversupply and turned to a deficit. Brent crude futures were trading at $48.80 per barrel at 1056 GMT, while U.S. crude futures were up 1.8 percent, at $47.06 a barrel.
Gold prices rose as stock markets eased after Chinese data missed forecasts. Spot gold was up 0.7 percent at $1,282.17 an ounce at 1058 GMT, while U.S. gold futures for June delivery were up $10.20 an ounce at $1,282.90.
Treasuries Recap
The U.S. Treasuries slumped as oil prices rebounded to new 2016 highs after long-time bear Goldman Sachs said the market had ended almost 2-years of oversupply following global oil disruptions and flipped to a deficit. Also, firmer than expected advance April retail sales figure drove out traders from safe-haven buying. The yield on the benchmark 10-year bonds rose 1bps to 1.712 pct by 1055 GMT. Markets will now look ahead to a greater flow of data this week, highlighted by minutes from the April FOMC meeting on Wednesday. Although we now see it as a long-shot that the Fed will move to raise rates in June, the April minutes provide an opportunity to see what may be holding the Fed back from continuing along their path of policy normalization.
The European bonds traded nearly flat after soft Chinese data pointed to a moderation in the world's second largest economy. Also, rallying crude oil prices drove-out investors from safe-haven buying. Moreover, bund prices are likely to be ruled by the movements in the crude oil market. The benchmark German 10-year bonds yield stood unchanged at 0.128 pct, French 10-year bunds yield remained steady at 0.479 pct, Italian equivalents rose 1bps to 1.484 pct, Spanish 10-year bonds yield flat at 1.609 pct and Portuguese 10-year bonds yield climbed 1bps to 3.161 pct, Netherlands 10-year bonds yield stood unchanged at 0.351 pct, British 10-year bonds yield fell 1bp to 1.360 pct by 1035 GMT.
The Irish bonds strengthened on Monday after Moody's upgraded the country's credit rating to A3 from Baa1. The yield on the benchmark 10-year bonds fell 3bps to 0.792 pct by 0950 GMT.
The Indian government bonds were trading marginally lower as India Meteorological Department (IMD) said that monsoon may get delayed by a week on Sunday. Also, investors shifted to safe-haven assets after data showed higher than expected April wholesale inflation figure, raised concerns that the Reserve Bank of India (RBI) may not be able to slash rates at the up-coming policy meeting. The yield on the benchmark 10-year bonds rose 0.09 pct to 7.457 pct, the yield on 12-year bonds rose 0.17 pct to 7.787 pct, 30-year bonds yield rose 0.14 pct to 7.861 pct and the yield on the 2-year bond climbed 0.06 pct to 7.120 pct by 0710 GMT.
The Japanese government bonds traded nearly flat, succumbing to thin trading activity as it is widely expected that the BoJ did not offer to buy JGBs under its massive JGB purchase program. Moreover, bond prices are likely to be ruled by the movements in the crude oil market. The yield on the benchmark 10-year bonds stood unchanged at -0.104 pct by 0620 GMT.
The Australian government bonds rallied on Monday as global government debt instrument gained 3.9 pct in 2016 amid deepening economic growth fears. Also, rising possibilities of further monetary easing from the Reserve Bank of Australia (RBA) due to lower inflation expectations drove investors towards safe-haven assets. The yield on the benchmark 10-year Treasury note which moves inversely to its price fell 3bps to 2.244 pct by 0510 GMT.
The material has been provided by InstaForex Company – www.instaforex.com