KRW: Authorities Resolve On FX Stability Still Being Tested
The 1 month USD/KRW NDF climbed as high as 1293 post the Asia-close, before closing around 1291 in NY. This is through the May 12 high of 1292.69. Spot closed yesterday just under 1284.
- Headwinds remain strong for the won from an equity market standpoint. Loses in the SOX accelerated to 5.61% overnight, while the MSCI IT index lost 4.61%.
- These moves come after the Kospi fell 3.5% yesterday. Foreign investors sold $349mn in local equities, after net outflows of $2.45bn from last week.
- The 1 month NDF closing level in NY of just under 1291 implies a higher spot open today.
- This could see resolve around FX stability tested once again. Yesterday's comments around monitoring excessive volatility helped push onshore USD/KRW spot lower. Note that the May 12th high in spot was 1291.45. Beyond that is the March 2020 high of 1296.75.
- Locally, the BoK minutes from the May policy decision are due. The decision was unanimous to hike by 25bps.
- The on-going truckers' strike is expected to impact activity more this week, if it persists, as inventory levels start to wane for key producers. The daily volume of containers transported to and from South Korea's 12 ports dropped to 68% of the May average yesterday.
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USDCAD TECHS: Bullish Outlook
- RES 4: 1.3173 High Nov 13 2020
- RES 3: 1.3168 2.0% 10-dma envelope
- RES 2: 1.3091 High Nov 24 2020
- RES 1: 1.3077 High May 12
- PRICE: 1.2933 @ 16:46 BST May 13
- SUP 1: 1.2914/2814 High May 2 / Low May 6
- SUP 2: 1.2737/14 50-day EMA / Low May 5 and a key support
- SUP 3: 1.2568 Low Apr 22
- SUP 4: 1.2459 Low Apr 21
USDCAD faded off the week’s highs into the close of the week, although the outlook remains bullish. Recent gains have resulted in a breach of 1.2914, May 2 high, and key resistance at 1.2964, the Dec 20 2021 high. The break of the latter marks an important medium-term bullish technical development and reinforces the positive outlook. This has opened 1.3168 next, the upper band of a MA envelope. Initial support is at 1.2914. Key support lies at 1.2714, Apr 29 low.
US TSYS: Risk-On AS Mkt Takes Adaptive Fed Seriously?
FI markets traded weaker after the bell -- 30Y Bond around upper half of the week's range but well off Thursday's highs. Little react to morning data (import prices lower than exp at +0.0%; U/Mich sentiment 59.1 vs 64 est, "lowest reading since 2013").
- Tsy 30Y Bond futures holding to narrow channel on the way down (30YY taps 3.0959 high vs. 2.9531% early Thu), curves bear steepening: 2s10s +5.017 at 33.449, 5s10s +2.367 at 4.881.
- Rates under pressure w/ focus back on Fed policy after Fed Chair Powell said he's prepared to consider larger than 50bp hikes in Marketplace interview late Thu (after downplaying 75bp moves at his press conference last week), as the committee adapts to "incoming data and the evolving outlook".
- Not that the correlation is a factor these days, but Equities did have a nice rebound on the day, SPX emini futures +99.0 at 4026.25.
- Commodities: WTI Crude Oil (front-month) holding strong +4.05 at $110.18; Gold weaker at $1807.95 -13.77.
- Next Monday Data Calendar:
- Empire Manufacturing (24.6, 15) at 0830ET
- NY Fed Williams moderated discussion, no text at 0855ET
- US Tsy $45B 13W, $42B 26W bill auctions at 1130ET
- Net Long-term TIC Flows ($141.7B, --) Net TIC Flows ($162.6B, --) at 1600ET
US: US-ASEAN Summit Concludes
The final event of the US-ASEAN summit, an exchange of views on regional and global issues, has concluded. US President Joe Biden and the Southeast Asian leaders will appear at a White House joint press event shortly.
- A livestream of the event is available here: https://www.youtube.com/watch?v=SpZz2944dmU
