ASIA FX: TWD Weakness Continues, USD/HKD Holding Above Mid Point Of Peg Band
In North East Asia FX, the standout so far today has further TWD weakness. USD/TWD has risen into the 30.45/50 region, fresh highs back to May of this year. There has been little movement elsewhere in the region.
- For USD/TWD we have now cleared all key EMA resistance, except the 200-day, see the chart below. Further TWD weakness comes today, despite a rebound in onshore equities. The Taiex is up around 1.35% in latest dealings, after falling nearly 3% yesterday. Fallout from yesterday's nearly $2.4bn in offshore equity outflows may be a factor weighing on TWD for today as well. Yesterday's data for export orders also suggests headline export growth may moderate in H2.
- For USD/CNH, we saw a fresh low for the USD/CNY fixing back to Nov last year. Onshore USD/CNY spot opened lower, but found support under 7.1700. USD/CNH got to lows of 7.1716, but sits slightly higher now. Spot CNY looks to be lagging the stronger fixing outcomes, but some offset may be coming from mainland capital outflows, with inflows into Hong Kong equities highlighted of late.
- Spot USD/KRW has tracked recent ranges. We were last close to 1399. We haven't tested above 1400 in this most recent run higher.
- Spot USD/HKD sits at 7.8090, stabilizing after the recent move under the middle of the peg band (sub 7.8000). HKD T/N pts are drifting wider, last beyond -10pts, which could encourage re-engagement on long USD/HKD carry trades.
Fig 1: USD/TWD Versus Key EMAs
Source: Bloomberg Finance L.P./MNI
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EURUSD TECHS: Support Remains Intact
- RES 4: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1899 2.0% 10-dma envelope
- RES 2: 1.1851 High Sep 10 2021
- RES 1: 1.1750/1829 High Jul 10 / 01 and the bull trigger
- PRICE: 1.1690 @ 06:11 BST Jul 22
- SUP 1: 1.1557 Low Jul 17
- SUP 2: 1.1525 50-day EMA
- SUP 3: 1.1446 Low Jun 19
- SUP 4: 1.1405 Low Jun 11
EURUSD has recovered from last week’s 1.1557 low,on Jul 17. Recent weakness is considered corrective. Support to watch lies at the 50day EMA , at 1.1525. A clear break of this average is required to signal a stronger reversal. For now, trend indicators continue to highlight a dominant uptrend. A stronger resumption of gains would open 1.1829, the Jul 1 high and the bull trigger.
BUND TECHS: (U5) Trades Through The 50-Day EMA
- RES 4: 131.95 High Jun 13 and the bull trigger
- RES 3: 131.33 High Jun 20
- RES 2: 130.76 High Jul 4
- RES 1: 130.48 High Jul 21
- PRICE: 130.47 @ 05:49 BST Jul 22
- SUP 1: 129.73/08 Low Jul 21 / 14
- SUP 2: 128.97 Low May 14 and a reversal trigger
- SUP 3: 128.90 Low Apr 10
- SUP 4: 128.40 Low Apr 9
Bund futures traded higher Monday. The climb resulted in a move through resistance around the 50-day EMA, at 131.22. A clear break of the EMA would undermine the recent bear theme and highlight a possible reversal. This would open 130.76 initially, the Jul 4 high. Clearance of this level would strengthen a bullish theme. A key support and the bear trigger has been defined at 129.08, the Jul 14 low.
OIL: Trade Uncertainty Weighs On Crude
Crude continued its pattern of declines while trading in a narrow range. WTI is down 1.0% to $66.51/bbl but with the August contract expiring today volumes have been thin. Brent is also 1.0% lower at $68.51/bbl, close to the intraday trough. The market continues to worry about the impact of higher US tariffs and trading partner retaliation on global energy demand. The USD index is slightly higher after falling 0.5% on Monday.
- Trade negotiations with the US continue ahead of the August 1 deadline. Japan’s negotiator Akazawa met with US Commerce Secretary Lutnick for more than 2 hours to formulate a deal that would profit both countries, according to Reuters. Talks between the EU and US have been difficult and are ongoing but President Trump is threatening the region with 30% duties.
- Ukraine and Russia are scheduled to meet for a third time in Turkey on Wednesday to negotiate a truce. The two sides have been unable to find common ground. Trump is warning that if a ceasefire isn’t agreed within 50 days that there will be additional tariffs on countries who buy Russian crude, which could impact trade talks with China and India. The situation is difficult, as Russia and purchasers have effectively found ways around sanctions and reducing Russian oil exports could boost prices, which would be unpopular in the US.
- Later the Fed’s Powell will make opening remarks at a regulatory conference and Bowman appears too but with the blackout having begun ahead of the July 30 decision, monetary policy is unlikely to be covered. US July Philly and Richmond Fed indices, and the ECB’s bank lending survey are released. BoE Governor Bailey testifies on financial stability.
