Market Brief
In Asia, equity returns are mixed this morning as both Japan and China released weak economic data. China’s Shanghai Composite gains 3.50% while its tech heavy counterpart, the SZSE Composite jumps 3.27%. In Hong Kong, the Hang Seng edges slightly lower and losses -0.28%. The Japanese Nikkei added 0.34% while the broader TOPIX Index was up 0.72%. South Korea’s KOSPI is down -0.35%, Thailand's shares losses -0.39% while in India, the BSE Sensex 30 Index edges higher by 0.52%. Further south, Australian shares gained 0.56% while in New Zealand the stock market closed slightly into negative territory, down -0.06%.
Data released on Saturday indicates that Chinese exports fell -8.3%y/y versus -1.5% and imports dropped -8.1%y/y versus -8.0% median forecast. July’s trade balance printed at $43.03bn while analysts were looking for higher figure of $54.70bn. The poor figures, which increase the odds of further monetary stimulus from the PBoC, together with rumours that the government will hasten mergers of state-owned companies, bolstered mainland shares. Furthermore, July’s CPI printed at 1.6%y/y versus 1.5% expected while PPI came in at -5.4%y/y versus -5% median forecast.
In the FX market, AUD/USD has been proven unable to break the 0.7429 resistance and is currently trading slightly below the 0.74 threshold. USD/JPY was trading sideways in Tokyo despite both current account and trade surplus weakened in June. Non-adjusted current account balance printed at ¥558.6bn versus ¥785.9bn median forecast while trade balance came in at ¥102.6bn versus ¥119.7bn. As a result the dollar recovers versus the yen after Friday’s sharp sell-off due to disappointing US job data. We expect the yen to weaken further versus the dollar as the BoJ maintains its dovish bias while the Fed is getting ready to tighten its monetary policy.
Last Friday’s US payrolls report was mixed as July’s NFP fell short of expectations as it printed at 215k versus 225k expected while on the other hand last month figures were revised higher to 231k from 223k. All in all, we do not expect the greenback to rally strongly as the dollar is lacking support from clear economic data. After having dropped to 1.0860, EUR/USD bounced back to its initial level and is now trading in a narrow range around 1.0970. On the downside, the single currency will find support at 1.09 (previous low) while on the upside a strong resistance lies at 1.1123 (Fib 50% on June-July debasement).
GBP/USD was unable to break the 1.5461 resistance (Fib 61.8% on June rally) and is back in its 2-figure range (1.5460-1.5690). The cable will find support at 1.5330 (previous low) and will find a strong resistance at 1.5690 (previous high). EUR/GBP is edging higher amid broad based optimism of a Greek bailout deal.
Today traders will be watching Sweden’s June industrial production; Norway’s July CPI; Brazil’s weekly trade balance; India’s trade balance.
Currency Tech
EUR/USD
R 2: 1.1436
R 1: 1.1278
CURRENT: 1.0974
S 1: 1.0819
S 2: 1.0660
GBP/USD
R 2: 1.5930
R 1: 1.5803
CURRENT: 1.5504
S 1: 1.5330
S 2: 1.5171
USD/JPY
R 2: 135.15
R 1: 125.86
CURRENT: 124.46
S 1: 120.41
S 2: 118.89
USD/CHF
R 2: 1.0129
R 1: 0.9863
CURRENT: 0.9814
S 1: 0.9526
S 2: 0.9072