ASIA FX: CNH Shrugs Off Weaker July Data, USD/HKD Slumps On Higher Hibor Rates
In North East Asia FX, USD/CNH is a touch higher, with the weaker July data outcomes weighing only at the margin. However, near 7.1850 leaves us comfortably within recent ranges. Local equities are still up modestly, with focus potentially on further stimulus measures. Focus this week has been on subsidy plans on loan interest for individuals and businesses aimed at improving consumption. Another proposal considered would see state owned enterprises purchasing unsold homes. The authorities also noted July activity was impacted by floods and high temperatures.
- South Korea markets have been out today, while USD/TWD is testing above 30.00. At 30.04 this is fresh multi month highs for the pair. In the past week there has been a notable slowdown in offshore equity flows, after a strong run higher in the period prior. Negative seasonality could also remain in play for TWD.
- Spot USD/HKD is down noticeably, the pair last near 7.8200, which is fresh lows back to mid May. Hibor rates have come to life in recent sessions, as HKMA's on-going intervention and liquidity withdrawal has started to impact. The 1 week Hibor was set today at 0.95%, we were at 0.35% on Wednesday. T/N HKD points at -6.0, so still negative but also back to mid May levels.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURUSD TECHS: Corrective Cycle Extends
- RES 4: 1.1949 2.0% 10-dma envelope
- RES 3: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1851 High Sep 10 2021
- RES 1: 1.1750/1829 High Jul 10 / 01 and the bull trigger
- PRICE: 1.1618 @ 06:07 BST Jul 16
- SUP 1: 1.1593 Low Jul 15
- SUP 2: 1.1575 Low Jul 24
- SUP 3: 1.1505-day EMA
- SUP 4: 1.1446 Low Jun 19
A corrective cycle in EURUSD remains in play and the pair traded lower Tuesday. Support at the 20-day EMA, at 1.1655, has been cleared. This shifts the focus to the 50-day EMA, at 1.1505. A clear break of the average is required to highlight a stronger reversal. For now, the move down appears corrective and trend signals continue to highlight a dominant uptrend. A resumption of gains would open 1.1829, the Jul 1 high and a bull trigger.
AUSSIE BONDS: Modestly Cheaper, June Jobs Data Tomorrow
ACGBs (YM -3.0 & XM -3.0) are cheaper with narrow ranges.
- Cash US tsys are flat to 1bp richer, with a flattening bias, in today's Asia-Pac session after yesterday's post-CPI sell-off.
- Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at -7bps. At -7bps the differential is positioned near the middle of the +/- 30bps range that has held since November 2022.
- The bills strip cheaper with pricing -3 to -4 beyond the first contract (-1).
- RBA-dated OIS pricing is firmer across meetings today and remains 17–21bps above levels seen prior to the 8 July RBA decision. A 25bp rate cut in August is given an 88% probability, with a cumulative 54bps of easing priced by year-end.
- Tomorrow, the local calendar will see June Employment and Consumer Inflation Expectation data.
- (Bloomberg Economics) -- Australia’s labour market report for June is likely to show a lift in jobs and a slight increase in the unemployment rate. We expect a 20k increase in jobs, after a weaker-than-expected 2.5k decline in May.
- The AOFM plans to sell A$1100mn of the 1.00% 21 November 2031 bond on Friday.
BUND TECHS: (U5) Bear Cycle Remains Intact
- RES 4: 131.95 High Jun 13 and the bull trigger
- RES 3: 131.33 High Jun 20
- RES 2: 130.76 High Jul 4
- RES 1: 130.01/130.28 20- and 50-day EMA values
- PRICE: 129.48 @ 05:44 BST Jul 16
- SUP 1: 129.08 Low Jul 14
- SUP 2: 128.97 Low May 14 and a reversal trigger
- SUP 3: 128.90 Low Apr 10
- SUP 4: 128.40 Low Apr 9
Bund futures have recovered from their latest lows, however, a bear cycle remains intact. Recent weakness resulted in a break of 129.30, the May 22 low. The breach strengthens the current bearish theme and exposes the next key support at 128.97, the May 14 low and a bear trigger. On the upside, resistance around the the 50-day EMA, at 130.28, marks the key short-term hurdle. A clear breach of it is required to highlight a possible reversal.
