Market Roundup
- Yen rallies as U.S.-China trade war, recession worries weigh
- Gold lingers near $1,500/oz on trade concerns
- Oil gains despite weak demand outlook
Economic Data Ahead
- No major economic data releases
Key Events Ahead
- No Significant Event Scheduled
FX Beat
DXY: The dollar index rebounded after White House trade adviser Peter Navarro said that the United States was still planning to hold another round of trade talks with Chinese negotiators. However, the recovery appears fragile as Goldman Sachs stated that recession risks were increasing due to the U.S.-China trade war, and cut its forecast for fourth-quarter U.S. growth. The greenback against a basket of currencies traded 0.5 percent up at 97.50, having touched a low of 97.03 on Friday, its lowest since July 19.
EUR/USD: The euro rose, extending gains above the 1.1200 handle, despite the prospect of snap elections in Italy. The political uncertainty in Italy had a limited effect on the euro after the leader of Italy’s League Matteo Salvini, who pulled the plug on his own governing coalition and called for a snap election, stated that leaving the eurozone was not an option on the table. The European currency traded 0.1 percent up at 1.1209, having touched a high of 1.1249 last week, its highest since July 19. Investors’ attention will remain on the U.S. monthly budget statement, amid a lack of data from the Eurozone economies. Immediate resistance is located at 1.1241 (August 7 High), a break above targets 1.1282 (July 19 High). On the downside, support is seen at 1.1164 (38.2% retracement of 1.1026 and 1.1249), a break below could drag it below 1.1138 (50% retracement).
USD/JPY: The dollar plunged, hovering towards a 7-month low hit in the previous session as the U.S.-China trade dispute continued to weigh on investor sentiment. Fears still lingered after U.S. President Donald Trump said that Washington was continuing trade talks with Beijing, but that the U.S. was not going to make a deal for now. The major was trading 0.3 percent down at 105.40, having hit a low of 105.26 earlier, its lowest since Jan 3. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. monthly budget statement. Immediate resistance is located at 106.22 (23.6% retracement of 109.31 and 105.26), a break above targets 106.81 (38.2% retracement). On the downside, support is seen at 105.22, a break below could take it lower at 104.65 (Jan. 3 Low).
GBP/USD: Sterling slumped to a fresh 2-1/2 year low on news that Labour MPs had been told to cancel all travel in early September in anticipation of Jeremy Corbyn tabling a motion of no confidence in the government. Moreover, Friday's data showing the UK economy unexpectedly contracted in the second quarter further added to the bearishness over Brexit and the chance of a no-deal exit. The major traded 0.1 percent up at 1.2035, having hit a low of 1.2014 earlier, it’s lowest since Jan. 2017. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2135 (23.6% retracement of 1.2522 and 1.2079), a break above could take it near 1.2210 (38.2% retracement). On the downside, support is seen at 1.1986 (Jan 16, 2017, Low, a break below targets 1.1904 (Oct 7, 2016, Low). Against the euro, the pound was trading flat at 93.12 pence, having hit a low of 93.24 earlier, it’s lowest since October 2009.
AUD/USD: The Australian dollar consolidated within narrow ranges as investors await the Chinese figures on retail sales and industrial output due Wednesday to gauge the impact of the trade war on domestic activity. The Aussie trades flat at 0.6812, having hit a low of 0.6677 last week, it’s lowest since March 2009. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6746 (August 8 Low), a break below targets 0.6700. On the upside, resistance is located at 6831 (38.2% retracement of 0.7082 and 0.6677), a break above could take it near 0.6879 (50% retracement).
NZD/USD: The New Zealand dollar treads water as the uncertainty and lack of progress around the talks have kept financial markets on the edge. The Kiwi trades flat at 0.6468, having touched a low of 0.6376 on Wednesday, its lowest level Jan 2016. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6534 (38.2% retracement of 0.6790 and 0.6376), a break above could take it near 0.6583 (50% retracement). On the downside, support is seen at 0.6400, a break below could drag it below 0.6365.
Equities Recap
Asian shares tumbled as investors worried a prolonged U.S.-China trade war could tip the U.S. and world economies into recession.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2 percent.
Australia's S&P/ASX 200 index declined 0.2 percent to 6,569.00 points and South Korea's KOSPI surged 0.4 percent to 1,944.89 points.
Shanghai composite index rose 0.6 percent to 2,791.08 points, while CSI 300 index traded 0.8 percent up at 3,662.68 points.
Hong Kong’s Hang Seng traded 0.1 percent lower at 25,916.64 points. Taiwan shares shed 0.05 percent to 10,488.66 points.
Commodities Recap
Crude oil prices surged, extending gains for the third straight session, despite worries about an economic slowdown and the U.S.-China trade war, which have led to a cut in the growth outlook for oil demand. International benchmark Brent crude was trading 0.3 percent higher at $58.42 per barrel by 0434 GMT, having hit a low of $55.86 on Wednesday, its lowest since January. U.S. West Texas Intermediate was trading 0.3 percent up at $54.37 a barrel, after falling as low as $50.51 on Wednesday, its lowest since the January.
Gold prices steadied below the $1,500 per ounce level amid the U.S.-China trade conflict and growing fears of a global economic slowdown. Spot gold was trading flat at $1,496.68 per ounce by 0441 GMT, having touched a high of $1,510.29 on Wednesday, its highest since April 2013. U.S. gold futures were flat at $1,508.50 an ounce.
Treasuries Recap
The U.S. Treasury yields declined on Friday after data showed domestic prices on core producer goods and services unexpectedly fell in July for first time since October 2015. The benchmark 10-year yields were 1.3 basis points lower at 1.702 percent, while 30-year yields were down 2.1 basis points at 2.226 percent.
