ASIA FX: ADXY Index Challenging 2020 Lows
Asian FX is weaker across the board, with the J.P. Morgan ADXY Index now close to 2020 lows, see the chart below. USD/CNH is just under 6.9300, while spot USD/KRW is at 1350. Broad based USD strength continues, fuelled by higher yields and weaker regional equity market sentiment.
- CNH: USD/CNH was pressing higher in early trade amidst broad USD strength against the majors. We got through 6.9000 and then 6.9200 not long after. There was a slight pause in the lead up to the CNY fixing, which was once again on the strong side of expectations (nearly 100 pips), but this support didn't last. The pair got through 6.9300, before settling back below this level, which is where we currently sit. China equities have modestly outperformed the broader sell-off elsewhere in the region.
- KRW: Spot USD/KRW sits at 1350 currently, which is +1.35% above closing levels from last week. Weakness in onshore equities has not helped, while rhetoric from the South Korean authorities around one-sided FX moves has also done little to stem USD buying pressure today.
- INR: USD/INR has pushed to new record highs above 80.00. We opened around 80.10/15 before drifting a little lower. Equities slumped at the open, but have pared losses now (still down -1.3%). India's data calendar swings back into gear this week, with Q2 GDP out on Wednesday.
- SGD: USD/SGD broke above 1.4000 in early trade but is now back below this level. We have seen modest SGD FX outperformance, which has helped the NEER edged higher. According to the Goldman Sach's estimate we aren't too far away from recent highs (just under 132.50 for the NEER).
- THB: Baht gapped lower at the open and hasn't found much traction since. USD/THB is close to 36.43, over 1% higher on closing levels form last week. Onshore equities are down 1.3% at this stage, in line with the region trend.
- MYR: Malaysian CPI, for July, came out in line with market expectations, at +4.4% YoY. We are almost back at 2021 highs. Transport and food were the main sources of inflation pressure. USD/MYR has managed to avoid fresh cyclical highs. The pair has stopped short of a move through 4.4900 for now (last at 4.4893).
Y Index Close To 2020 Lows
Source: J.P. Morgan/Bloomberg/MNI/Market News/Bloomberg
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USDCAD TECHS: Heading South
- RES 4: 1.3224 High Jul 14
- RES 3: 1.3188 3.0% Upper Bollinger Band
- RES 2: 1.3038 High Jul 18
- RES 1: 1.2904/47 20-day EMA / High Jul 25
- PRICE: 1.2805 @ 16:42 BST Jul 29
- SUP 1: 1.2788 61.8% retracement of the Jun 8 - Jul 14 upleg
- SUP 2: 1.2763 Low Jun 13
- SUP 3: 1.2685 76.4% retracement of the Jun 8 - Jul 14 upleg
- SUP 4: 1.2633 2.0% 10-dma envelope
USDCAD maintains a bearish theme and the pair is trading at its recent lows. 1.2819, the Jun 28 low, has been pierced. A clear break of this support would strengthen bearish conditions and extend the move below both the 20- and 50-day EMA values. This would open 1.2763, the Jun 13 low. On the upside, initial resistance to watch is currently at 1.2947, Jul 25 high. A break would ease the current bearish threat.
US TSYS: Rates Off Highs Into Month End
Tsys futures remain mixed by the bell, curves flatter with short end underperforming: 2s10s -4.966 at 24.198, 5s10s -2.275 at -4.803.
- Weaker data in-line w/ more moderate rate hikes later in the year: Little initial reaction after slight gain in June reading of Personal Income is +0.6% MoM vs. +0.5 est, PCE Deflator is +1.0% MoM vs. +0.9% est, and ECI +1.3% vs. +1.2% est. Rates and stocks moved higher after the Chicago Business BarometerTM, produced with MNI, slid further in July, extending June's decline. The indicator fell 3.9-points to 52.1, the lowest level since August 2020.
- Exogenous factors: Tsys had come under pressure in early London hours after higher than expected French, Italian and Spanish GDP economic data triggered selling in EGBs w/ brief pause after weaker than expected German GDP.
- Meanwhile, Fed speakers out of media blackout: Atlanta Fed Bostic broke the seal earlier, reiterating Chair Powell's talking point: we are not in a recession, but inflation needs to be addressed w/ "more work needs to be done on bringing demand and supply into balance".
- Next Monday data: S&P Global Mfg data (52.4 est), ISMs (mfg 52.0 est; prices paid 73.5 est), JOLTS job openings (10.994M).
- Current cross assets: spot Gold +5.35 at 1761.19, Crude firmer but off early highs WTI +2.18 at 98.60, stocks on high ESU2 +64.50 at 4138.00 -- highest level sine June 9..
- Currently, 2-Yr yield is up 4.1bps at 2.9027%, 5-Yr is up 1bps at 2.7079%, 10-Yr is down 1.1bps at 2.665%, and 30-Yr is down 1.7bps at 3.0057%.
AUDUSD TECHS: Holding On To Its Gains
- RES 4: 0.7202 High Jun 9
- RES 3: 0.7141 76.4% retracement of the Jun 3 - Jul 14 downleg
- RES 2: 0.7069 High Jun 16
- RES 1: 0.7053 61.8% retracement of the Jun 3 - Jul 14 downleg
- PRICE: 0.6971 @ 16:39 BST Jul 29
- SUP 1: 0.6903/0.6859 20-day EMA / Low Jul 21
- SUP 2: 0.6786/6682 Low Jul 18 / 14 and the bear trigger
- SUP 3: 0.6647 0.764 proj of the Apr 5 - May 12 - Jun 3 price swing
- SUP 4: 0.6588 Low May 28 2020
AUDUSD is holding on to its recent gains and the short-term outlook remains bullish. A continuation higher would open the Jun 16 high at 0.7069, and potentially 0.7141 further out, a Fibonacci retracement. A strong reversal lower would instead refocus attention on the 0.6682 bear trigger, Jul 14 low, where a break would confirm a resumption of the broader downtrend. Initial support to watch is at 0.6903, the 20-day EMA.
