ASIA FX: KRW Volatility, USD/TWD NDFs See Resumed Selling
May-09 04:58
In North East Asia FX markets, KRW volatility has been the standout today, while TWD NDFs has seen resumed USD selling pressure. USD/CNH has been relatively steady.
- USD/CNH holds near 7.2500 in latest dealings, slightly up on end Thursday levels. The USD/CNY fix rose, as expected, while the error term re-widened in line with stronger USD index levels. China's Foreign Ministry noted that the country has full confidence in its ability to handle the trade conflict with the US. Equally it was noted that the US tariff levels can't be sustained given the suffering of ordinary people in the US. This comes ahead of the key US-China trade talks in Switzerland this weekend.
- April trade data showed export and import growth better than forecast. Exports to the US fell sharply, while the trade surplus was narrower. The trade surplus China had with the EU was larger than that with the US, highlighting China's shifting trade flows in response to US tariff levels.
- Spot USD/KRW was on the front foot in the first part of Friday trade, the pair getting up to 1415, which was around the 200-day EMA resistance point and lows from April. We quickly reversed lower though and sit back at 1400 in latest dealings. This coincided with broader USD retracement.
- Spot USD/TWD has remained very steady, the pair last near 30.30, so still within recent ranges but showing a slight upside bias in recent sessions. Greater USD selling pressure has returned to the NDF market though. The 1 month is off 1.3%, last under 29.70, while the 6 mth is back under 29.00, off by 1.4%. The 12 mth has fallen to 28.24, down nearly 1.6%. Taiwan equities have risen strongly today, up over 1.6%, which may be aiding the NDF move, while NDF shifts back closer to spot levels may also be encouraging fresh hedging flows.
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US TSYS: Haven Demand Under Threat From China Retaliation
Apr-09 04:58
TYM5 is 110-12, +1-02 from closing levels in today's Asia-Pac session.
- Cash US tsys have extended yesterday's decline during the Asia-Pac session. The sell-off reflects growing concerns that China may retaliate against tariffs by offloading US assets, including US tsys.
- Alongside the steepening of the curve, interest-rate swaps have extended their recent extreme outperformance of US tsy securities as traders sought to avoid costs associated with holding bonds.
- Cash US tsys are currently trading 2-17bps cheaper across benchmarks, with the curve steeper.
- Yesterday, Trump officials confirmed the 104% tariff on China went into effect at noon. Concurrently, China vowed to "fight to the end".
- On the local front, the focus turns to the March FOMC minute release at 1400ET today, CPI on Thursday and PPI on Friday morning.
- Reminder, banks kick off the latest earnings cycle this Friday with Bank of New York Mellon, Wells Fargo & Co, JPMorgan Chase and Morgan Stanley reporting.
BOBL TECHS: (M5) Trend Outlook Remains Bullish
Apr-09 04:57
- RES 4: 120.000 Psychological round number
- RES 3: 119.960 High Apr 7
- RES 2: 119.594 76.4% retracement of Monday’s high-low range
- RES 1: 119.368 61.8% retracement of Monday’s high-low range
- PRICE: 119.180 @ 05:42 BST Apr 9
- SUP 1: 118.410/117.971 Low Apr 7 / 20-day EMA
- SUP 2: 117.680 Low Apr 1
- SUP 3: 117.410 Low Mar 27
- SUP 4: 117.080 Low Mar 25 and a key short-term support
Bobl futures have pulled back from their recent highs - a correction. Last week’s gains resulted in a break of key resistance at 119.040, the Feb 28 high. This strengthens bullish conditions and signals scope for a continuation. The focus is on the 120.000 handle next. The contract is overbought, a deeper pullback would allow this condition to unwind. Initial firm support lies at 117.971, the 20-day EMA.
GOLD: Gold Rises Again as Equities Struggle
Apr-09 04:54
- Gold’s few uncertain days may be behind it as the rally began today as equities retreated.
- As tariff headlines abounded and having opened at US$2,984.58 gold rallied in the Asian trading afternoon back above $3,000 to be $3,009.00
- The White House has said that it will be pursuing tariffs of up to 104% on Chinese goods whilst Chinese Premier Li said that his country had ‘ample tools’ to “fully offset” the tariffs.
- Whilst gold enjoys ‘safe haven’ status amongst investors, in times of high volatility investors seek liquidity, something gold does not exhibit.
- Chinese investors put a record 7.6 billion yuan into gold-backed exchange-traded funds last week, seeking safety amid trade war tensions.
- Gold appears to be the only safe haven at present again as even treasuries are getting caught in the cross fire today.
