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Asia Roundup: Dollar steadies as Hong Kong tensions weigh, euro rallies on massive EU stimulus plan, Asian shares trim gains - Thursday, May 28th, 2020

Market Roundup

  • Oil drops on surprise U.S. stock build
     
  • Gold gains amid Hong Kong unrest

Economic Data Ahead

  • (0400 ET/0800 GMT) Italy Business Confidence(May)   
      
  • (0400 ET/0800 GMT) Italy Consumer Confidence(May)  
     
  • (0500 ET/0900 GMT) Italy Trade Balance non-EU(Apr)   
     
  • (0500 ET/0900 GMT) EZ Services Sentiment(May)            
  • (0500 ET/0900 GMT) EZ Consumer Confidence(May)   
       
  • (0500 ET/0900 GMT) EZ Industrial Confidence(May)     
       
  • (0500 ET/0900 GMT) EZ Business Climate(May)
     
  • (0500 ET/0900 GMT) EZ Economic Sentiment Indicator(May)      
     
  • (0600 ET/1000 GMT) Italy Producer Price Index (YoY)(Apr)           
     
  • (0600 ET/1000 GMT) Italy Producer Price Index (MoM)(Apr)
     

Key Events Ahead

  • No Significant Events Scheduled

FX Beat

DXY: The dollar index nudged up after slumping to an over 3-week low in the prior session after Assistant Secretary of State for East Asia, David Stilwell, stated that U.S. President Donald Trump has a long list of possible responses to China's plans to impose a national security law on Hong Kong, including visa and economic sanctions. The greenback against a basket of currencies traded 0.05 percent up at 98.98, having touched a low of 98.72 on Wednesday, its lowest since May 4.

EUR/USD: The euro rallied to a near 2-month peak, bolstered by a 750 billion euro European Union plan to prop up the bloc's virus-hit economies. The European currency traded 0.2 percent up at 1.1022, having touched a high of 1.1035 earlier, its highest since April 1. Investors’ attention will remain on a series of data from Eurozone economies, EZ economic sentiment indicator and German prelim consumer price index, ahead of the U.S. durable goods, unemployment benefit claims, preliminary gross domestic product, personal consumption expenditures prices, pending home sales, Kansas Fed manufacturing activity and Fed William's speech. Immediate resistance is located at 1.1053, a break above targets 1.1094. On the downside, support is seen at 1.0981, a break below could drag it below 1.0945 (5-DMA).

USD/JPY: The dollar rose, extending previous session gains, amid growing optimism over recovering global growth as economies re-open after coronavirus lockdowns. The major was trading 0.1 percent up at 107.81, having hit a high of 108.08 last week, its highest since Apr. 13. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. durable goods, unemployment benefit claims, preliminary gross domestic product, personal consumption expenditures prices, pending home sales, Kansas Fed manufacturing activity and Fed William's speech. Immediate resistance is located at 108.08, a break above targets 108.34. On the downside, support is seen at 107.55, a break below could take it near at 107.33.

GBP/USD: Sterling steadied after tumbling from a 2-week peak in the prior session on the prospect of negative interest rates in Britain, a deep recession and a growing pile of debt. The major traded 0.1 percent up at 1.2270, having hit a high of 1.2363 on Tuesday, it’s highest since May 12. Investors’ attention will remain on the geopolitical developments ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2307 (21-DMA), a break above could take it near 1.2340. On the downside, support is seen at 1.2214 (10-DMA), a break below targets 1.2185. Against the euro, the pound was trading 0.1 percent down at 89.81 pence, having hit a low of 90.00 last week, it’s lowest since March 27.

AUD/USD: The Australian dollar consolidated within narrow ranges amid an escalating war of words between the U.S. and China. On Wednesday, U.S. Secretary of State Mike Pompeo stated that China’s plan to impose laws in Hong Kong was to fundamentally undermine the city’s autonomy and freedoms. The Aussie trades flat at 0.6621, having hit a high of 0.6680 on Wednesday, it’s highest since March 9.  Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate resistance is located at 0.6680, a break above could take it near 0.6733. On the downside, support is seen at 0.6567, a break below targets 0.6544 (10-DMA).

Equities Recap

Asian shares trimmed gains on growing worries China’s planned security law for Hong Kong would spark a broader diplomatic confrontation with the United States.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.35 percent.

Tokyo's Nikkei rose 2.3 percent to 21,916.31 points, Australia's S&P/ASX 200 index rallied 1.3 percent to 5,851.10 points. South Korea's KOSPI eased 0.1 percent to 2,028.54 points.

Shanghai composite index rose 0.3 percent to 2,846.22 points, while CSI 300 index traded 0.3 percent up at 3,856.63 points.

Hong Kong’s Hang Seng traded 1.0 percent lower at 23,071.50 points. Taiwan shares shed 0.6 percent to 10,944.19 points.

Commodities Recap

Crude oil prices declined for a second straight session as U.S. industry data showed a steep build-up in crude stockpiles, dampening hopes of a smooth demand recovery. International benchmark Brent crude was trading 0.2 percent lower at $34.02 per barrel by 0602 GMT, having hit a high of $36.96 last week, its highest since March 11. U.S. West Texas Intermediate was trading 1.4 percent down at $31.74 a barrel, after rising as high as $34.78 on Tuesday, its highest since March 11.

Gold prices rose, retreating from a 2-1/2 week low hit in the prior session as tensions between the United States and China over a Hong Kong security law escalated. Spot gold was trading 0.6 percent up at $1,719.74 per ounce by 0610 GMT, having touched a low of $1,694.00 on Wednesday, its lowest since May 11. U.S. gold futures fell 0.2 percent to $1,723.60.

Treasuries Recap

On Wednesday, the U.S. benchmark 10-year note yields fell three basis points to 0.672 percent. The yields have traded in a range from 0.543 percent to 0.785 percent since the beginning of April.

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