ASIA FX: USD/TWD Collapses Amid US-China Trade Hopes, Stronger Equities
In North East Asia, FX sentiment has been firm, particularly for TWD, posting its biggest intra-day gain since 2011 (per BBG). USD/KRW is also lower shrugging off local political concerns, while USD/CNH has lagged these downside moves. Onshore markets in China remain closed until next Tuesday.
- South Korean and Taiwan PMIs fell in April, amid negative trade sentiment. The average of these indices is pointing to slower global trade growth. Still, sentiment was buoyed by headlines from the China Commerce Ministry that it is assessing the US request for trade talks. There are still lots of caveats but the market drew hope that discussions may take place, which in turn could lead to a lowering in trade tensions.
- USD/CNH is eyeing a downside test sub 7.2500, but has been supported around the 200-day EMA in Friday trade to date. Further south is the simple 200-day MA (near 7.2230). The pair couldn't sustain tests below this support level in March. Hong Kong markets are up firmly, aided by trade hopes, the HSI last +1.6%.
- USD/TWD has collapsed. The pair got to session lows of 31.154, but we sit up around 31.30/35 in latest dealings, still +2.1% stronger in TWD terms. US-China Trade hopes has seen TWD outperform, while local equities are up over 2%. Some recent tech results which still hint at firm AI related demand a likely positive. Taiwan's GDP beat from late on Wednesday is also likely aiding the currency (local markets were shut yesterday). The pair is oversold based off RSI (14), but the trend is clearly skewed lower. If we can break sub 31.00, note that late 2023 lows were around 30.65.
- Spot USD/KRW initially lagged softer USD/Asia trends, with yesterday's resignation of the Finance Minister adding to the onshore political turmoil. The pair got to highs near 1440, but we sit back near 1420 in latest dealings. The won has clearly lagged the TWD move though.
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ASIA STOCKS: China’s Bourses Hold on to Marginal Gains
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- China’s main bourses delivered gains today with the Hang Seng up just +0.06, CSI 300 up +0.15%, Shanghai up +0.25% and Shenzhen up +0.38%.
- Taiwan’s TAIEX was weaker today by -0.10%, following yesterday’s huge gains of +2.8%.
- The KOSPI made yesterday’s gains look like an anomaly and fell again by -0.70%.
- With Indonesia still out, after being closed for two days for holidays, Malaysia’s FTSE Bursa KLCI is up +0.57% in trading today, after Friday’s fall of -1.44%
- In Singapore, the Straits Times is down -0.28% whilst the Philippines is up +0.42%.
- India’s NIFTY 50 is opening stronger this morning following yesterday’s significant falls of -1.50%, to be stronger by +0.50% in morning trading.
BOBL TECHS: (M5) Bull Cycle Remains In Play
- RES 4: 119.040 High Feb 28 and a key resistance
- RES 3: 118.950 High Mar 4
- RES 2: 118.382 76.4% retracement of the Feb 28 - Mar 6 sell-off
- RES 1: 118.200 High Mar 31
- PRICE: 117.870 @ 05:51 BST Apr 2
- SUP 1: 117.519 20-day EMA
- SUP 2: 117.080 Low Mar 25 and a ey short-term support
- SUP 3: 116.800 Low Mar 17
- SUP 4: 116.470 Low Mar 12
Bobl futures traded to a fresh short-term cycle high Monday. The contract has breached 117.974, the 61.8% retracement of the bear leg between Feb 28 - Mar 6. The break strengthens the current bull cycle and paves the way for a climb towards 118.382, a Fibonacci retracement. On the downside, initial support to watch lies at 117.519, the 20-day EMA. Key short-term support is at 117.080, the Mar 25 low.
RBA: MNI RBA Review-April 2025: Keeping Options Open
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- The RBA left rates unchanged at 4.10% on April 1, as was widely expected given the cautious tone following February’s 25bp cut. In the press conference, Governor Bullock said that it was a consensus decision and that easing wasn’t part of the discussion.
- It appears that the RBA is keeping its options open given that risks are to both sides and there is significant uncertainty around the outlook, especially from overseas. Upcoming Q1 CPI and March/April jobs data will be important in determining if the Board has become "more confident" that underlying inflation is returning "sustainably" to the mid-point of the target band, which enable it to consider the timing of the next rate cut.
- The central bank believes that Australia is unlikely to experience major direct effects from US tariffs given its small exposure to the US, but key concerns centre around how its main trading partners (China) & supply chains are affected and what retaliatory measures are taken. It noted that policy is "well placed to respond".
- A 25bp rate cut in May is given a 77% probability, with a cumulative 71bps of easing priced by year-end.
