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Asia Roundup: Antipodeans rally to multi-month highs, euro hits 2-1/2 year peak as dollar index tumbles on Fed's dovish tone, Asian shares rally - Thursday, July 27th, 2017

Market Roundup

  • China's Jun industrial profits surged 19.1% to 727.78 bln yuan
     
  • Rudd promises to keep door open for EU workers after Brexit - FT
     
  • UK car industry - clarity on Brexit needed, June output -13.7% - SMMT
     
  • Australia Q2 export prices, -5.7% vs 9.4%, forecast -6.3%
     
  • Q2 import prices, -0.1% vs 1.2%, forecast 0.7%
     
  • U.S. lawmakers reach deal for Senate Russia sanctions vote

Economic Data Ahead

  • (0200 ET/0600 GMT) Germany Aug GfK Consumer Sentiment, 10.60 eyed, last 10.60
     
  • (0300 ET/0700 GMT) Spian Q2 Unemployment Rate, 17.80% eyed, last 18.75%

Key Events Ahead

  • (0400 ET/0800 GMT) ECB releases monthly data on lending and money supply
     
  • (0505 ET/0905 GMT) Italy 6 mnth E6.5 bln auction
     
  • (1950 ET/2350 GMT) BOJ to release summary of July 19-20 policy meeting

FX Beat

DXY: The dollar slumped across the board after the U.S. Federal Reserve's policy statement was perceived to be slightly on the dovish side. The greenback against a basket of currencies traded 0.1 percent down at 93.33, having touched a low of 93.15 earlier, it’s lowest since Jun. 23 2016. FxWirePro's Hourly Dollar Strength Index stood at -50.98 (Bearish) by 0500 GMT.

EUR/USD: The euro rallied to a 2-1/2 year high near the 1.1800 handle, as a less hawkish Fed statement continued to weigh on the sentiment around the greenback. The FOMC decision came in line with market expectations, with the Committee leaving rates unchanged and hinting September as the launch time for the Fed’s balance sheet reduction plan. The European currency traded 0.2 percent up at 1.1753, having touched a high of 1.1776 earlier, its highest since Jan 14, 2015. FxWirePro's Hourly Euro Strength Index stood at -62.43 (Bullish) by 0400 GMT. Investors’ attention will remain on Eurozone Private loans and M3 Money supply data, ahead of the U.S. unemployment benefit claims, wholesale inventories, goods trade balance and durable goods orders report. Immediate resistance is located at 1.1800, a break above targets 1.1830. On the downside, support is seen at 1.1688 (78.6% retracement 1.1370 and 1.1776), a break below could drag it near 1.1620 (61.8% retracement 1.1370 and 1.1712).

USD/JPY: The dollar declined below the 111.00 handle as a lack of fresh hints on whether the Fed remains on track to hike rates this year combined with a dovish tone in the statement triggered a broad based U.S. dollar sell-off.  The major was trading 0.1 percent down at 111.03, having hit a low of 110.62 on Monday, its lowest since Jun 15. FxWirePro's Hourly Yen Strength Index stood at -50.47 (Bearish) by 0400 GMT. Investors’ will continue to track broad based market sentiment, ahead of the U.S. unemployment benefit claims, wholesale inventories, goods trade balance and durable goods orders report for further momentum. Immediate resistance is located at 111.47 (78.6% retracement of 114.49 and 110.62), a break above targets 112.15 (10-DMA). On the downside, support is seen at 110.62 (July 24 Low), a break below could take it near 110.30 (June 5 Low).

GBP/USD: Sterling rose to a 10-month high above the 1.3100 handle as the broad based dollar selling following the FOMC rate decision and upbeat UK Q2 prelim GDP figures boosted the bid tone around the major. Sterling traded 0.2 percent up at 1.3141, having hit a high of 1.3157 earlier, its highest since Sept. 16. FxWirePro's Hourly Sterling Strength Index stood at 47.25 (Neutral) by 0400 GMT. Investors’ focus will remain on the developments surrounding the Brexit negotiations, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3200, a break above could take it near 1.3250. On the downside, support is seen at 1.3085 (78.6% 1.2816 and 1.3157), a break below targets 1.3006 (10-DMA). Against the euro, the pound traded 0.1 percent up at 89.37 pence, having hit an 8-month low of 89.94 last week.

AUD/USD: The Australian dollar advanced to a 2-year high above the 0.8000 handle, as stronger-than expected rise in the Chinese industrial profits data and renewed broad based USD weakness underpinned the Aussie bulls' sentiments. Investors seem to have ignored disappointing domestic import prices data, which showed import price index and export price index eased -0.1 percent and -5.7 percent, respectively. The Aussie trades 0.6 percent higher at 0.8049, having hit a high of 0.8065 earlier, it’s highest since May 15, 2015. FxWirePro's Hourly Aussie Strength Index stood at 107.21 (Highly Bullish) by 0500 GMT. Investors will continue to digest domestic trade figures, ahead of U.S. economic releases. Immediate support is seen at 0.7960 (76.6% retracement of 0.7571 and 0.8065), a break below targets 0.7877 (61.8% retracement of 0.7571 and 0.8066). On the upside, resistance is located at 0.8100, a break above could take it near 0.8150.

NZD/USD: The New Zealand dollar extended gains above the 0.7500 handle on the back of strong Chinese industrial profits data, coupled with Fonterra’s announcement and ongoing broad U.S. dollar weakness. New Zealand’s dairy giant Fonterra announced that it made upward revision to its farmgate milk prices, while China's Industrial profits in June climbed at an annualized rate of 19.1 percent versus 16.7 percent previous. The Kiwi trades 0.3 percent up at 0.7546, having touched a high of 0.7558 earlier, its highest level since May 14 2015. FxWirePro's Hourly Kiwi Strength Index was at 82.45 (Slightly Bullish) by 0500 GMT. Investors’ will continue to track broad based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7580, a break above could take it near 0.7620. On the downside, support is seen at 0.7481 (78.6% retracement of 0.7201 and 0.7558), a break below could drag it till 0.7422 (61.8% retrace).

Equities Recap

Asian shares rallied following a rebound in the crude oil prices, while the greenback tumbled to 13-month lows following remarks on inflation by the U.S. Federal Reserve.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.9 percent.

Tokyo's Nikkei rallied 0.5 percent to 20,155.40 points, Australia's S&P/ASX 200 index gained 0.2 percent to 5,790.10 points and South Korea's KOSPI rose 0.3 percent to 2,440.18 points.

Shanghai composite index fell 0.03 percent to 3,246.86 points, while CSI300 index was trading 0.2 percent up at 3,711.91 points.

Hong Kong’s Hang Seng was trading 0.5 percent higher at 27,064.65 points. Taiwan shares added 0.8 percent to 10,508.37 points.

Commodities Recap

Crude oil prices steadied after rising to an 8-week high in the prior session, supported by hopes that a steeper-than-expected decline in U.S. crude oil inventories will reduce global oversupply. International benchmark Brent crude was trading flat at $50.86 per barrel by 0430 GMT, having hit a high of $51.02 on Wednesday, its strongest since Jun. 1. U.S. West Texas Intermediate was little changed at $48.64 a barrel, after rising as high as $48.84 the prior day, its strongest since Jun 1.

Gold prices rallied to a fresh six-week highs, with the dollar hovering close to 13-month lows following the U.S. Federal Reserve's dovish statement. Spot gold traded 0.3 percent up at $1,263.53 per ounce at 0434 GMT, having hit a high of $1,264.77 an ounce earlier, it highest since June 15. U.S. gold futures for August delivery rose almost 1 percent to $1,261.40 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.281 percent higher by 0.001 bps, while 5-year yield was 0.003 up at 1.830 percent.

The Australian bonds jumped, tracking strength in the U.S. counterpart after the Federal Reserve delivered a slightly dovish statement in its meeting concluded late Wednesday, signalling that it is ready to announce the start of balance sheet normalization. The yield on the benchmark 10-year Treasury note slumped nearly 3-1/2 basis points to 2.69 percent, the yield on 15-year note also plunged 3-1/2 basis points to 3.00 percent and the yield on short-term 3-year too traded 3-1/2 basis points lower at 2.03 percent.

The Japanese bonds climbed following the overnight rise in U.S. bond prices after the Federal Reserve maintained a relatively dovish tone in its monetary policy statement, released yesterday. The yield on the benchmark 10-year Treasury note fell 1 basis point to 0.70 percent, the yield on 30-year note also slipped nearly 1 basis point to 0.86 percent and the yield on short-term 2-year traded 1/2 basis point lower at -0.11 percent.

The Canadian government bond prices were higher across the maturity curve, with the two-year price up 7.5 Canadian cents to yield 1.287 percent and the benchmark 10-year rising 43 Canadian cents to yield 1.968 percent. The Canada-U.S. two-year bond spread was -6.9 basis points, while the 10-year spread was -32.3 basis points.

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