ASIA FX: USD Losses Curbed By Equity Weakness, China GDP, BoK & BI Next Week
The past week has mostly delivered Asia FX gains, with lwoer US Tsy levels and a firmer yen, aiding such trends. There have been some laggards though with TWD, IDR and MYR not participating. Focus is likely to shift to broader risk trends we have seen some sharp regional equity losses today following the Wall St dip on Thursday (amid credit concerns). Continued risk off could lend USD/Asia pairs more support. Next Monday we have Q3 GDP growth which is expected to slow. The BoK and BI decisions are due next week, with BI seen cutting, BoK on hold.
- USD/CNH couldn't sustain sub 7.1200 levels. From lows of 7.1168, we are back to 7.1240, little changed. This comes despite another lwoer USD/CNY fix, while some offset is coming from weaker equities. China stocks are threatening to break down through 20-day EMA support. Seemingly little in the way of forward US-China progress may be weighing on the yuan. Next Monday also delivers house prices for Sep, and Sep activity figures.
- USD/KRW has edged a little higher, last near 1420, with support evident around the 1414 region. Local equities are outperforming, but broader equity trends are less supportive, while US-South Korea trade deal doubts linger.
- USD/TWD is holding near 32.65, off 0.35% so far this week in TWD terms. Local equities are off 1% despite strong TSMC results yesterday. We have also seen nearly $2bn in net equity outflows the past 5 trading days.
- USD/IDR has also struggled for downside this week. We remain around 16585 currently, near the 20-day EMA. Next week the BI may cut again to support growth, which could weigh on IDR all else equal. Local equities are off over 2% so far today, as recent gains are given back.
- SGD, MYR, THB and PHP have all ticked up against the USD so far today.
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JGBS: Market Strengthens After 20Y Auction, Japan's Exports Hit By Tariffs
JGB futures are stronger, +9 compared to the settlement levels, after today’s 20-year auction.
- The 20-year JGB auction delivered solid results across key metrics. The low price outperformed dealer forecasts, which were set at 97.80 according to a Bloomberg poll. Moreover, the cover ratio jumped to 3.9974x from 3.0853 in the previous outing and the auction tail shortened to 0.10 from 0.13.
- MNI Brief: Japan's exports fell for a fourth straight year-on-year decline in August, down 0.1% after July's 2.6% drop, as shipments of automobiles and iron, and steel products were hit by U.S. tariffs.
- Cash US tsys are little changed in today's Asia-Pac session ahead of today's FOMC decision.
- Nick Timiraos on X: "The Fed is expected to cut rates by 25 bps on Wednesday, with all eyes on how many officials pencil in three cuts for the year, implying consecutive cuts in October and December. A walk-up to an FOMC meeting unlike any in recent memory."
- Cash JGBs are little changed across benchmarks apart from the benchmark 20-year yield, which is 1.5bps lower at 2.651%.
- Swap rates are 1bp lower to 1bp higher, with a flattening bias. Swap spreads are mixed.
- Tomorrow, the local calendar will see Core Machine Orders and Tokyo Condominiums for Sale. The BoJ also starts its 2-day policy meeting.
EURUSD TECHS: Northbound
- RES 4: 1.2063 2.236 proj of the Feb 28 - Mar 18 - 247 price swing
- RES 3: 1.2000 Round number resistance
- RES 2: 1.1923 2.00 proj of the Feb 28 - Mar 18 - 247 price swing
- RES 1: 1.1878 High Sep 16
- PRICE: 1.1859 @ 06:06 BST Sep 17
- SUP 1: 1.1710/52 20- and 50-day EMA values
- SUP 2: 1.1574 Low Aug 27
- SUP 3: 1.1528 Low Aug 5
- SUP 4: 1.1392 Low Aug 1 and bear trigger.
The trend theme in EURUSD remains bullish. Resistance at 1.1743, the Aug 22 high, has recently been cleared reinforcing a bull cycle. Tuesday’s gains have resulted in a climb above 1.1829 the Jul 01 high and bull trigger. Clearance of this hurdle confirms a resumption of the primary uptrend and opens 1.1923 next, a Fibonacci projection. Support to watch is the 50-day EMA, at 1.1652.
OIL: Crude Holding Gains Ahead Of Fed & EIA Data
Crude has held onto most of this week’s gains trending only slightly lower during today’s APAC session. WTI is down 0.1% to $64.45/bbl after a low of $64.37 but it reached $64.67 early in the session. Brent is 0.1% lower at $68.38/bbl, close to the intraday low. The USD index is little changed ahead of the Fed decision later on Wednesday.
- A dovish Fed is likely to be good for oil prices as rate cuts should support energy demand, as long as it doesn’t sound worried about the growth outlook.
- Oil prices have been supported this week by concerns that measures taken against Russia, including Ukrainian attacks on its energy infrastructure, and conflict in the Middle East could impact supplies.
- The EU is discussing further restrictions to reduce Russia’s energy revenues including sanctions on Chinese and Indian companies that facilitate imports from Russia. EC President von der Leyen said that the EU is looking into fast tracking the end of energy imports from Russia after the US said it needs to stop.
- Industry data showed a large US crude stock drawdown. The official EIA data is out later today and with the IEA forecasting a record market surplus in 2026, this data will be monitored for signs of a rising inventory trend.
- Later the focus is on the Fed (see MNI Fed Preview) but there are also August US housing starts/permits, August UK/euro area CPIs and the Bank of Canada decision (forecast to cut 25bp). In addition to Powell and BoC Governor Macklem, ECB President Lagarde and Board member Cipollone also speak today.
