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Asia Roundup: Kiwi eases on RBNZ rate cut expectations, greenback gains as investors await U.S. jobs report for Fed clues, Asian shares rally - Friday, July 5th, 2019

Economic Data Ahead

  • (0330 ET/0730 GMT) UK Halifax House prices

Key Events Ahead

  • (0400 ET/0800 GMT) European Central Bank Vice-president Luis De Guindos' speech

FX Beat

DXY: The dollar index gained as investor focus on whether today's U.S. jobs report will help make or break the case for a rate cut later in July. The greenback against a basket of currencies traded 0.1 percent up at 96.82, having touched a high of 96.88 on Tuesday, its highest since June 20.

EUR/USD: The euro consolidated within narrow ranges as German benchmark 10-year government bond yield matched the European Central Bank’s deposit rate of minus 0.4 percent for the first time on Thursday, indicating that investors were braced for interest rate cuts soon. The recent weaker-than-expected EZ data stoked fears of deeper economic slowdown and reinforced expectations of European Central Bank rate cuts. The European currency traded flat at 1.1280, having touched a low of 1.1268 on Wednesday, its lowest since June 20. Investors’ attention will remain on a series of data from the Eurozone and ECB De Guindos' speech, ahead of U.S. nonfarm payroll report, unemployment rate and Fed monetary policy report. Immediate resistance is located at 1.1327 (38.2% retracement of 1.1412 and 1.1275), a break above targets 1.1360 (61.8% retracement). On the downside, support is seen at 1.1251 (June 7 Low), a break below could drag it below 1.1203 (June 17 Low).

USD/JPY: The dollar gained as investors awaited the U.S. non-farm jobs report that could influence the course of near-term Federal Reserve policy. The markets expect the U.S. non-farm payrolls to increase by 160,000 in June as compared to 75,000 in May, while average hourly earnings could rise 3.2 percent from 3.1 percent on a yearly basis but no change is expected in 3.6 percent unemployment rate. The pair was trading 0.1 percent up at 107.92, having hit a low of 107.53 on Wednesday, its lowest since Jun. 26. Investors’ will continue to track the broad-based market sentiment, ahead of U.S. nonfarm payroll report, unemployment rate and Fed monetary policy report. Immediate resistance is located at 108.36 (June 4 High), a break above targets 108.80 (June 11 High). On the downside, support is seen at 107.24 (June 24 Low), a break below could take it lower at 106.78 (June 25 Low).

GBP/USD: Sterling held firm near 2-week low, as investors believe the Bank of England might have to ease monetary policy in order to support the economy. The major traded 0.1 percent up at 1.2583, having hit a low of 1.2557 on Wednesday, it’s lowest since June 19. Investors’ attention will remain on the UK Halifax house prices, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2613 (5-DMA), a break above could take it near 1.2658 (10-DMA). On the downside, support is seen at 1.2542 (June 19 Low), a break below targets 1.2506 (June 18 Low). Against the euro, the pound was trading 0.1 percent up at 89.59 pence, having hit a high of 89.19 on Tuesday, it’s highest since Jun. 25.

AUD/USD: The Australian dollar traded flat after rising to a 2-month peak in the previous session on the back of RBA cash rate cut and the passage of the Federal Government’s tax plan.  The Aussie trades flat at 0.7015, having hit a high of 0.7047 on Thursday, it’s highest since May 7.  Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6941 (June 25 Low), a break below targets 0.6901 (June 13 Low). On the upside, resistance is located at 0.7048 (May 7 High), a break above could take it near 0.7076 (Mar. 11 High).

NZD/USD: The New Zealand dollar slumped as the market assumes the Reserve Bank of New Zealand will cut rates again at its next meeting in August, particularly if the Fed moves, and will reach 1 percent by early next year. The Kiwi trades 0.2 percent down at 0.66741, having touched a high of 0.6726 on Monday, its highest level April 18. Immediate resistance is located at 0.6753 (April 8 High), a break above could take it near 0.6799 (Apr. 4 High). On the downside, support is seen at 0.6656 (July 2Low), a break below could drag it below 0.6592 (June 26 Low).

Equities Recap

Asian shares hovered near 2-month highs as investors braced for U.S. employment data that could stoke or temper market expectations about aggressive policy easing by the Federal Reserve.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.2 percent.

Tokyo's Nikkei gained 0.2 percent to 21,746.38 points, Australia's S&P/ASX 200 index gained 0.5 percent to 6,751.30 points and South Korea's KOSPI surged 0.05 percent to 2,109.73 points.

Shanghai composite index rallied 0.1 percent to 3,010.16 points, while CSI 300 index traded 0.5 percent down at 3,891.15 points.

Hong Kong’s Hang Seng traded 0.05 percent lower at 28,788.27 points. Taiwan shares rose 0.1 percent to 10,785.73 points.

Commodities Recap

Crude oil prices surged amid elevated tensions in the Middle East that could disrupt supply routes and send prices higher. International benchmark Brent crude was trading 0.4 percent higher at $63.41 per barrel by 0526 GMT, having hit a low of $62.06 on Wednesday, its lowest since June 19. U.S. West Texas Intermediate was trading 0.1 percent up at $56.82 a barrel, after falling as low as $56.03 on Wednesday, its lowest since the June 20.

Gold prices rallied and were on track for a seventh consecutive weekly gain, as investors awaited U.S. employment data that could influence expectations about aggressive policy easing by the Federal Reserve. Spot gold was 0.2 percent up at $1,417.69 per ounce by 0529 GMT, having touched a high of $1,437.66 on Wednesday, its highest since June 25 and has gained nearly 0.7 percent so far this week. U.S. gold futures were steady at $1,420.80 an ounce.

Treasuries Recap

The Japanese government bond prices edged up, with the benchmark 10-year JGB yield dipping half a basis point to minus 0.165 percent. The 30-year yield also declined half a basis point, to 0.340 percent.

The Australian government bonds gained on the last trading day of the week amid a silent Asian session that witnessed data of little economic significance. The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped nearly 1-1/2 basis points to 1.285 percent, the yield on the long-term 30-year bond edged 1 basis point to 1.934 percent and the yield on short-term 2-year traded tad lower at 0.940 percent.

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