ASIA FX: Mixed Trends, BoT Expected To Cut Later, Yen Weakness Spilling Over
Asian currencies are mixed, with negative spill over evident from on-going yen weakness. This is true for 1 month USD/KRW and spot USD/SGD. We are retracing off recent USD highs for some other pairs though, like THB and PHP ahead of key central bank meetings.
- USD/CNH is a touch higher, last around 7.1475, against earlier highs above 7.1500. Onshore markets return tomorrow after the National Day holiday period. CNH/JPY has surged higher to 21.32, fresh highs since Jan of this year, as yen risks have been repriced since the LDP leadership election. Focus will be on the extent to which onshore USD/CNY spot (and the fixing) play catch up to these trends. History suggests USD/CNY upside will be modest and gradual.
- 1 month USD/KRW is at 1418, off 0.30% in won terms. The impact of weaker yen trends is continuing to be felt. Onshore South Korean markets return Friday.
- Spot USD/SGD continues to climb, the pair now eyeing a 1.3000 test (last near 1.2960).
- USD/PHP is lower, last around 58.00. Earlier data showed the Aug unemployment rate falling notably, which should add to the BSP on hold case tomorrow (which is what the consensus expects).
- USD/THB is down slightly, last near 32.47, backing away from a test of the 100-day EMA resistance point for now. The BoT is expected to cut rates later, but it may have to be quite a dovish cut to shift THB sentiment (particularly given fresh record highs in gold).
- USD/IDR is back above 16600, we fresh pressure potentially coming if we see the ID-US 10yr spread break under +200bps. Earlier data on consumer confidence likely adds to the firm downside bias in Indonesian bond yields. Consumer confidence fell for a second straight month to 115.0 in September from 117.2, the lowest since April 2022.
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Historical bullets
EURUSD TECHS: Monitoring Resistance
- 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: 1.1760 High Sep 5
- PRICE: 1.1714 @ 06:04 BST Sep 8
- SUP 1: 1.1619 50-day EMA
- SUP 2: 1.1574/1.1528 Low Aug 27 / Low Aug 5
- SUP 3: 1.1392 Low Aug 1 and bear trigger
- SUP 4: 1.1373 Low Jun 10
The trend theme in EURUSD remains bullish. Friday’s gains resulted in a print above resistance at 1.1743, the Aug 22 high. A clear break of this hurdle would mark a short-term bullish development and signal scope for an extension towards 1.1829, the Jul 01 high and bull trigger. Support to watch is around the 50-day EMA, at 1.1619. A clear breach of this average would signal scope for a deeper retracement.
BUND TECHS: (Z5) Breaches Resistance
- RES 4: 129.66 High Jul 22
- RES 3: 129.50 High Aug 5 and a key resistance
- RES 2: 129.31 High Aug 6
- RES 1: 129.20 High Sep 5
- PRICE: 128.96 @ 05:42 BST Sep 8
- SUP 1: 128.25 Low Sep 4
- SUP 2: 127.61 Low Sep 3 and the bear trigger
- SUP 3: 127.46 1.00 proj of the Aug 14 - 15 - 28 price swing
- SUP 4: 127.13 1.236 proj of the Aug 14 - 15 - 28 price swing
Bund futures rallied sharply higher Friday and this has resulted in a break of resistance at 128.87, the Aug 28 high and short-term bull trigger. The climb undermines a recent bearish theme and highlights a stronger reversal. Price has moved through the 129.00 handle, signalling scope for a climb towards 129.50, the Aug 5 high. Key support and the bear trigger has been defined at 127.61, the Sep 3 low.
ASIA STOCKS: Strong Start to the Week for Regional Bourses
Japanese equities have greeted the political news positively with strong gains, post PM Ishiba's decision to step down as leader. This injects fresh political uncertainty into Japan's broader economic outlook. Focus will now turn to the LDP leadership race. When Ishiba secured the PM position last Oct, the runner up was Sanae Takaichi. Via ABC news: "A Nikkei survey held at the end of August put Ms Takaichi as the most "fitting" successor to Ishiba." Takaichi could arguably generate the most significant market reaction if she is successful becoming the new PM, as she has been outspoken in terms of being more dovish in terms of the BoJ outlook and looking to boost fiscal spending. Shenzhen's announcement that it will join Beijing and Shanghai in easing home-buying rules has given China's building shares a boost in Monday's trading.
- China's key bourses are all higher, with the exception of the CSI 300 which is flat. The Hang Seng is up +0.35%, Shanghai up +0.17% and Shenzhen up +0.45%.
- The Nikkei has started the week strongly with gains of +0.90%
- The TAIEX in Taiwan is higher by +0.45%
- The KOSPI's good run is continuing, up +0.17% today.
- The FTSE Malay KLCI was up only marginally in a shortened week last week and is higher by +0.48% today.
- The Jakarta Composite had a modest week last week, yet it up strongly today by +0.55%.
- The NIFTY 50 is up strongly Monday after key industries noted that the benefits from the GST cut will be passed onto consumers. The NIFTY 50 lags regional peers over the last three months as the sole index with falls yet starts this week off, up +0.32% to trade through key technical levels.
