ASIA FX: KRW & TWD Up, But Lag Equity Rally, THB & PHP Softer
Asian currencies are mixed in the first part of Thursday trade. In North East Asia, China markets remain out (until next Thursday), while Hong Kong returned today. USD/CNH remains within recent ranges, with dips under 7.1300 supported so far today. Other currencies have seen modest gains against the USD.
- For KRW and TWD, we have seen strong onshore equity gains, with tech/AI optimism continuing to drive positive sentiment. For South Korea, this is bringing in fresh offshore inflows today, but the won is only modestly higher. Spot USD/KRW is still above 1400 at this stage. One factor for the won may be trade deal uncertainty. Headlines crossed earlier that South Korean officials haven't got a positive response from US officials around a swap line with South Korea (which is eyed as important given South Korea's $350bn investment pledge).
- Spot USD/TWD is back at 30.40, also up only a touch in TWD terms. Both TWD and KRW have lagged the better tech inspired equity market backdrop.
- In South East Asia, USD/THB continues to trade with a positive bias, last at 32.45, which is just short of recent highs. Dovish BoT rhetoric and a considered focus on baht volatility is aiding the pair. The Citi THB NEER is now 2% off Sep highs (but still up YTD).
- USD/PHP is also being supported on dips, last near 58.25. There appears to be some resistance above the 58.30, while early August highs were just above 58.50.
- The Rupiah has had modest gains again today, similar to yesterday. At 16600/05 it continues to edge lower from last week's wides of 16750. Some stability in bond flows towards the end of Sep appears to be helping, while seasonality for IDR is less negative in Oct compared to Sep.
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OIL: Crude Continues Higher As Upcoming OPEC Meeting & US Payrolls In Focus
Oil prices have continued the rally started on Monday. WTI is up 1.4% to $64.90/bbl after reaching $65.10. Brent is 0.4% higher at $68.42/bbl after a peak of $68.58, remaining below resistance at $69.06. The prospect of a near-term easing in sanctions on Russia has faded with the US and EU now looking at extending them after attacks on Ukrainian cities have intensified. The USD index is up 0.1%.
- With the oil market expected to post a substantial surplus in 2026, supply developments are being watched closely.
- OPEC meets on September 7 to decide its October production target. There are still 1.65mbd of previous voluntary output cuts that could be unwound but analysts believe the group will hold production stable.
- Demand also remains in focus with concerns regarding the impact from increased US tariffs but the prospect of Fed easing is calming concerns. Friday’s August US payroll data will be key.
- Later the ECB’s Elderson and Machado appear. US August manufacturing PMI/ISM, July construction, euro area August CPI and July French budget data print.
EURUSD TECHS: Trend Needle Points North
- RES 4: 1.1851 High Sep 10 2021
- RES 3: 1.1829 High Jul 01 and the bull trigger
- RES 2: 1.1789 High Jul 24
- RES 1: 1.1743 High Aug 22
- PRICE: 1.1696 @ 06:08 BST Sep 2
- SUP 1: 1.1574/1.1528 Low Aug 27 / Low Aug 5
- SUP 2: 1.1392 Low Aug 1 and bear trigger
- SUP 3: 1.1373 Low Jun 10
- SUP 4: 1.1313 Low May 30
EURUSD has recovered from last week’s low. The trend set-up is bullish and short-term weakness is considered corrective. Note that the pair has pierced key support around the 50-day EMA, currently at 1.1611. A clear break of the average would signal scope for a deeper retracement and potentially expose key M/T support at 1.1392, the Aug 1 low. Key resistance and the bull trigger is 1.1829, the Jul 1 high. A breach would resume the primary uptrend.
BUND TECHS: (U5) Trading Above Its August Lows
- RES 4: 130.60 High Aug 5 and a key resistance
- RES 3: 130.26 High Aug 8
- RES 2: 130.06 High Aug 14
- RES 1: 129.74/90 50-day EMA / High Aug 28
- PRICE: 129.22 @ 05:46 BST Sep 2
- SUP 1: 129.07/128.64 Low Sep 1 / Low Aug 15 and the bear trigger
- SUP 2: 128.40 Low Apr 9
- SUP 3: 128.19 Low Mar 27 (cont)
- SUP 4: 127.83 76.4% retracement of the Mar 11 - Apr 7 bull leg (cont)
Bund futures traded lower Monday but continue to trade above their August lows. Recently, resistance at the 50-day EMA at 129.74 has been pierced. A clear breach of the EMA would signal scope for a stronger recovery within the multi-month range. This would open 130.06, the Aug 14 high. Key support and the bear trigger lies at 128.64. Clearance of this level would reinstate the recent bearish theme.
