TWD: HSBC Say Local reports About Extreme TWD Appreciation Seem Far-Fetched
- HSBC note that media reports about a significant TWD appreciation against the USD (to extreme numbers such as 13.3) as part of Taiwan’s trade deal with the US seem to have triggered a panic among locals to reduce or hedge their USD exposure.
- In addition, rising expectations for a “Trump put” and US-mainland China talks have likely helped to lift risk sentiment. Foreigners have returned to buying more local stocks in the recent weeks, after their record high outflows in March.
- HSBC highlight that Taiwan is one for the EM Asian economies with the biggest exposure to USD assets (only after mainland China and Singapore). Rising concerns about the US economy and policy uncertainty may thus trigger a bout of LHS hedging to reduce the risks. HSBC have suggested before that lifers were quite underhedged versus their historical average levels due to punitive hedging costs.
- They say local news headlines about extreme USD/TWD spot levels as part of a US-Taiwan trade deal seem quite far-fetched. The CBC has already said that the US has not asked for a stronger TWD thus far. HSBC research gives a fair value range between 26.459-29.153 for USD/TWD.
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EQUITY TECHS: E-MINI S&P: (M5) MA Studies Highlight A Dominant Downtrend
- RES 4: 5878.53 50-day EMA
- RES 3: 5837.25 High Mar 25 and a key resistance
- RES 2: 5757.95 20-day EMA
- RES 1: 5694.75 High Apr 1
- PRICE: 5618.00 @ 14:23 BST Apr 2
- SUP 1: 5559.75/33.75 Low Mar 13 and the bear trigger / Low Mar 31
- SUP 2: 5500.00 Round number support
- SUP 3: 5483.50 2.00 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
- SUP 4: 5396.00 2.236 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
S&P E-Minis maintain a softer tone. Sights are on key support and the bear trigger at 5559.75, the Mar 13 low. It has been pierced, a clear break of it would confirm a resumption of the downtrend that started Feb 19, and open 5483.30, a Fibonacci projection. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. Key short-term resistance has been defined at 5837.25, the Mar 25 high.
GILTS: Futures Through Trendline Resistance
Gilt futures trade through both trendline resistance (92.42) and yesterday’s high (92.45) alongside the extension of the rally in U.S. Tsys, with “Liberation Day” risks continuing to underpin core global FI markets.
- Next resistance noted at the 61.8% retracement of the March 4-27 move lower (92.55), followed by the Mar 20 high (93.01).
- Yields ~4bp lower across the curve. March lows remain intact, with many of the benchmark yields comfortably off last month’s lows.
EQUITIES: US Cash Opening calls
US Cash Opening calls, similar to Futures, Cash indices will Open in the red, but will also be above Yesterday's lows.
- Calls: SPX: 5,583.9 (-0.9%); DJIA: 41,716 (-0.7%/-274pts); NDX: 19,210.3 (-1.2%).
