ASIA FX: NEA Weaker, KRW & TWD Fall By More Than CNH
In North East Asian FX markets, the USD is better bid, with KRW and TWD falling by more than CNH. Broader USD sentiment is positive, aided by the tariff court ruling against Trump's reciprocal tariffs. The better US equity futures tone, which has been aided by the tariff news, along with Nvidia's earnings results, have also likely aided the dollar.
- USD/CNH got to highs of 7.2087, but sits back at 7.1980 in latest dealings, only a touch weaker versus end Wednesday levels in the US. Once again CNH is exhibiting a low beta with respect to broader USD shifts. In the G10 space, both JPY and CHF are underperforming, off nearly 0.60% versus the USD. CNH/JPY got just above 20.30 before selling interest emerged. Outside of the tariff/Nvidia news, US-China headlines have been negative. There are reports of further tech related curbs in the software space (related to semiconductor manufacturing), while the NYTs reported other export related restrictions. Visas for China students will also reportedly start to be revoked.
- Spot USD/KRW got to highs of 1385.35. The continued rally in onshore equities overshadowed by broader USD gains. We also had a dovish BoK 25bps cut, with further policy easing likely although Governor Rhee stated that rates were unlikely to fall sub 2% in the near term. USD/KRW sits back at 1382 now, still 0.50% weaker in won terms for the session. Governor Rhee also mentioned Asian countries have discussed FX with the US, which helped curb earlier highs.
- Spot USD/TWD is higher, but is just under the 30.00 level in latest dealings, around 0.30% weaker in TWD terms.
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OIL: Crude Continues Sell Off During APAC Trading Following Dallas Fed Drop
Oil prices continued declining during today’s APAC session. They fell on Monday with the sharp drop in the Dallas Fed manufacturing index adding to fears that trade agreements wouldn’t be reached with the US. WTI is 0.9% lower to $61.50/bbl, close to the intraday trough, while Brent is down 0.8% to $65.33/bbl. The USD index is up 0.3% which is also likely weighing on dollar-denominated crude.
- Oil’s reaction to the Dallas Fed data puts other releases this week, including GDP, ISM/PMIs and payrolls, even more in the spotlight. Signs that there was weakening in April, the reciprocal tariffs were announced April 2, would likely drive a further sell off as crude has been particularly worried about the impact of increased protectionism on global energy demand.
- China retaliated to US tariffs and while the US says that it is negotiating with it, China continues to deny that talks are taking place. Instead it has promised support for exporters and the economy and threatened others if they impact it negatively to gain favour with the US and warned against giving in to American “bullying”. China is the world’s largest oil importer.
- The supply side remains in focus with OPEC meeting on May 5 and the prospect of successful US-Iran talks resulting in an easing of sanctions. Also, US industry-based inventory data are released today.
- Later US April consumer confidence, March merchandise trade, JOLTS job openings, inventories and February house prices print, as well as the April European Commission survey, Spanish Q1 GDP and preliminary April CPI. The ECB’s Cipollone and Donnery speak.
EURUSD TECHS: Recent Pullback Considered Corrective
- RES 4: 1.1696 1.618 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1608 High Nov 9 2021
- RES 1: 1.1573 High Apr 21 and the bull trigger
- PRICE: 1.1379 @ 05:56 BST Apr 29
- SUP 1: 1.1308 Low Apr 23
- SUP 2: 1.1236 20-day EMA and a key support
- SUP 3: 1.1144/0986 High Apr 3 / 50-day EMA and a pivot level
- SUP 4: 1.0805 Low Apr 3
Short-term weakness in EURUSD is considered corrective and the trend structure remains bullish. Moving average studies are in a bull-mode position signalling a dominant uptrend, and the latest move down is allowing an overbought condition to unwind. A resumption of gains would open 1.1608 next, the Nov 9 2021 high. Key support is unchanged at the 20-day EMA, at 1.1236. A break of this average would signal scope for a deeper retracement.
FOREX: FOREX G10 Wrap - USD Can’t Hold Onto Gains
The BBDXY has had an Asian range of 1219.50 - 1222.42, Asia is currently trading around 1223. Spain is still searching for answers for Monday's Blackouts, the EU said there are no indications of a cyber attack. Bloomberg - “ Olli Rehn said there’s a danger that inflation will dip below the 2% target and that the euro’s strength has added “further complexity” to policy.”
- EUR/USD - Asian range 1.1374 - 1.1422, Asia is currently trading 1.1382. Intra-day support is around 1.1300, should this area not hold demand should remerge on dips back to 1.1100.
- GBP/USD - Asian range 1.3397 - 1.3444, the GBP continues to lead higher, testing decent Weekly resistance now around 1.3500.
- USD/JPY - Asian range 142.00 - 142.58, has drifted higher for most of the Asia session. On the day the 143 handle should once again offer supply, then more importantly the 145/146 area should once more offer good levels for sellers to reengage.
- USD/CNH - Asian range 7.2692 - 7.2887, the USD/CNY fix printed lower again at 7.2029. Bloomberg - “The yuan was boosted by a report that China vowed to comprehensively rectify all kinds of unreasonable regulations and practices that restrict market access.” This saw USD/CNH break below the 7.2800 support which contributed to sudden spikes in both the AUD and NZD.
- USD/CAD - Asian range 1.3809 - 1.3867, currently trading 1.3860. Canada’s Liberal Party wins the election too soon to know if it's by a majority. Bounces back to 140.00 should find sellers first up.
- Cross asset : SPX +0.21%, Gold 3317, US TYM5 111-27+, BBDXY 1222, Crude oil 61.60.
- Data/Events : Spain GDP & CPI, ECB CPI expectations, Germany consumer confidence
Fig 1 : GBP/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg
