ASIA FX: CNH & KRW Higher, INR Lags
USD/Asia pairs are lower today, amidst broad USD weakness and positive spill over from CNH and KRW gains. INR is the main outlier on the negative side, where rebounding oil prices are weighing.
- CNH: USD/CNH dipped sharply following the much stronger than expected CNY fixing (firmest outcome since early 2020, relative to expectations). We got towards the low 6.8515/20 region before rebounding. Moves above 6.8600 have drawn selling interest though and we are now threatening to break sub 6.8500 as we approach the London cross-over. Today's fix comes after the FX regulatory warned against shorting the yuan overnight, so clearly the degree of concern around FX depreciation pressures has risen.
- KRW: Spot USD/KRW has mostly tracked lower. Onshore equities are around 1% higher for the Kospi, which has helped. The BoK hiked by 25bps as expected and is also focused more on the exchange rate and its influence on the domestic economy. This echoes comments from other officials around FX levels in recent session. Dips below 1334 were supported in the 1 month NDF, we were last at 1335.80.
- INR: The rupee is underperforming the broader FX trend today. Spot USD/INR is above 79.80, while the 1 month USD/INR NDF has crept back above 80.05. Higher oil prices, with Brent continuing to recover, is weighing at the margin.
- IDR: Spot USD/IDR is lower by -19.5figs to 14828, in line with the regional trend. The gov't said it will submit the findings from its assessment on subsidised fuel price hikes to President Widodo this week. It will then announce the decision on price increase, which will be closely watched due to the ramifications for inflation dynamics.
- PHP: The Philippine peso has found poise as domestic FX and bond markets re-open after a one-day pause caused by adverse weather conditions. Spot USD/PHP last deals -0.075 at PHP56.015, with bears looking for losses past the 50-DMA, which kicks in at PHP55.523.
- THB: The baht outperforms its peers in emerging Asia, shrugging off the suspension of PM Prayuth until the Constitutional Court resolves a dispute on his term limit. Spot USD/THB trades -0.16 at THB35.89. From a technical standpoint, bears look for a dip through the 50-DMA (THB35.828) towards Aug 11 low of THB35.160.
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EURUSD TECHS: Bull Flag
- RES 4: 1.0450Bull channel resistance drawn from the Feb 10 high
- RES 3: 1.0405 50-day EMA
- RES 2: 1.0359 Low Jun 15
- RES 1: 1.0241/78 20-day EMA / High Jul 21
- PRICE: 1.0215 @ 16:32 BST Jul 25
- SUP 1: 1.0120 Low Jul 19
- SUP 2: 1.0064/0.9952 Low Jul 18 / 14 and the bear trigger
- SUP 3: 0.9944 1.618 projection of the Jun 9 - 15 - 27 price swing
- SUP 4: 0.9883 1.764 projection of the Jun 9 - 15 - 27 price swing
EURUSD is consolidating. The pair remains in a S/T bull cycle following the recent recovery from the base of a bear channel drawn from the Feb 10 high. The current consolidation appears to be a bull flag and this pattern reinforces bullish conditions. Attention is on the 20-day EMA. A clear breach of it would strengthen bullish conditions and signal scope for an extension within the channel - the top intersects at 1.0459. Initial support is at 1.0120, Jul 19 low.
AUSTRALIA: Q2 CPI In Focus Tomorrow
The main data event for Australia this week lands tomorrow, with Q2 CPI data out. To recap, market expectations are headline CPI to ease to 1.9% QoQ, from 2.1% in Q1. The YoY pace would still accelerate to 6.3% from 5.1% in Q1. For the RBA's preferred measure of underlying inflation, the trimmed mean, the market expects a further pick up to 1.5% QoQ from 1.4% in Q1. This would take YoY momentum, to 4.7% from 3.7% previously.
- The table below shows quarterly outcomes for headline and trimmed inflation over the past year.
- As has been the case elsewhere, in recent quarters inflation has been surprising on the upside. 0.4ppts and 0.3ppts for the headline in the past 2 quarters, 0.2ppts and 0.3ppts for the trimmed mean for the same reference periods.
- Q1 CPI data, which printed on April 27th produced a decent intra-day bounce in AUD/USD. We got to a high of 0.7191 on the day, but closed little different (0.7126 versus 0.7123) versus the previous session. The DXY was trending higher at this time though, so that may have influenced the AUD.
- 2yr AU bond yields ended April 27th around 3bps higher and continued to push higher over subsequent sessions.
Table 1: Australian CPI Outcomes - Actual & Expected QoQ Past 12 months
| Headline Actual | Headline Expected | Core Actual | Core Expected | |
| Q2 22 | 1.9 | 1.5 | ||
| Q1 22 | 2.1 | 1.7 | 1.4 | 1.2 |
| Q4 21 | 1.3 | 1.0 | 1.0 | 0.7 |
| Q3 21 | 0.8 | 0.8 | 0.7 | 0.5 |
| Q2 21 | 0.8 | 0.7 | 0.5 | 0.5 |
BTP TECHS: (U2) Bull Trigger Remains Exposed
- RES 4: 130.00 Round number resistance
- RES 3: 129.00 High May 12
- RES 2: 127.79 High May 26
- RES 1: 124.79/126.41 High Jul 20 / High Jul 1 and the bull trigger
- PRICE: 123.54 @ Close Jul 22
- SUP 1: 119.57 Low Jul 21 and key near-term support
- SUP 2: 118.60 Low Jun 22
- SUP 3: 115.72 Low Jun 16
- SUP 4: 113.78 Contract Low
BTP futures found support last week at 119.57, the Jul 22 low. The recent pullback is considered corrective and short-term bullish conditions remain intact. 119.57 has been defined as a key short-term support and if breached, would highlight a stronger reversal. An extension higher would refocus attention on key resistance at 126.41, the Jul high and bull trigger. A break would resume the uptrend.
