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Asia Roundup: Antipodeans steady amid ongoing U.S. - China trade war concerns, dollar index consolidates near 1-week low as investors focus on how China would retaliate - Friday, July 6th, 2018

Market Roundup

  • As tariffs loom, China state media slams Trump's 'gang of hoodlums'
     
  • Japan govt to forecast bullish CPI, GDP growth in FY2019
     
  • Struggling to save nuclear deal, Iran and world powers meet
     
  • Fed on lookout for recession but still sees strong economy -minutes
     
  • Do your Brexit duty, Britain's May tells her divided government
     
  • Japan May All Households Spding YY, -3.9%, f'cast -1.5%, last -1.3%
     
  • Foreign CB US debt holdings -$3.824 bln to $3.395 tln July 4 week
     
  • Treasuries -$6.143 bln to $3.032 tln, agencies +$2.191 bln to +$291.2 bln
     

Economic Data Ahead

  • (0245 ET/0645 GMT) France May Trade Balance, EUR, SA, f'cast -5.10 bln, last -4.95 bln
  • (0330 ET/0730 GMT) Great Britain Jun Halifax House Prices MM, f'cast 0.3%, last 1.5%
  • (0400 ET/0800 GMT) Italy May Retail Sales NSA YY, last -4.60%
  • (0630 ET/1030 GMT) Great Britain Jun BBA Mortgage Rate, last 4.16%

Key Events Ahead

  • (0600 ET/1000 GMT) ECB's Daniele Nouy speaks in Linz, Austria

FX Beat

DXY: The dollar index declined, hovering towards a 1-week low hit in the previous session, as U.S. President Donald Trump warned that subsequent rounds of tariffs could apply to more than $500 billion of Chinese goods. The greenback against a basket of currencies trades 0.1 percent down at 94.30, having touched a low of 94.18 the day before, its lowest since June 26. FxWirePro's Hourly Dollar Strength Index stood at -56.96 (Bearish) by 0500 GMT.

EUR/USD: The euro consolidated below the 1.1700 handle, as investor remained cautious ahead of Washington's implementation of its threatened tariffs on Chinese goods. The European currency traded flat at 1.1687, having touched a high of 1.1720 the day before, its highest since June 26. FxWirePro's Hourly Euro Strength Index stood at 56.59 (Bullish) by 0500 GMT. Investors’ attention will remain on series of data from the Eurozone economies, ahead of U.S. non-farm payroll, employment rate and trade balance data. Immediate resistance is located at 1.1720 (July 5 High), a break above targets 1.1744 (June 4 High). On the downside, support is seen at 1.1630 (July 4 Low), a break below could drag it till 1.1600.

USD/JPY: The dollar rose to a 3-day high as the minutes of the Federal Reserve's last policy meeting on June 12-13 released on Thursday suggested policymakers might soon indicate that the central bank's rate-hiking cycle was advanced enough that policy was no longer boosting or constraining the economy. The major was trading 0.1 percent up at 110.74, having hit a low of 110.28 on Wednesday, its lowest since June 28. FxWirePro's Hourly Yen Strength Index stood at -69.44 (Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S non-farm payroll, employment rate and trade balance data. Immediate resistance is located at 111.08 (June 18 High), a break above targets 111.39 (May 21 High). On the downside, support is seen at 110.36 (10-DMA), a break below could take it lower 109.68 (June 27 Low).

GBP/USD: Sterling traded within narrow ranges after rising to a 1-week peak in the previous session after Bank of England Governor Mark Carney boosted expectations of an interest rate hike next month. The major traded 0.1 percent up at 1.3228, having hit a high of 1.3274 the day before; it’s highest since June 26. FxWirePro's Hourly Sterling Strength Index stood at -2.0 (Highly Bullish) 0500 GMT. Investors’ attention will remain on UK Halifax house prices, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3270, a break above could take it near 1.3314 (June 22 High). On the downside, support is seen at 1.3192 (10-DMA), a break below targets 1.3146 (June 20 Low). Against the euro, the pound was trading 0.1 percent down at 88.48 pence, having hit a high of 87.99 pence on Wednesday, it’s highest since June 27.

AUD/USD: The Australian dollar rose above the 0.7400 handle, as President Donald Trump's tariffs on $34 billion in Chinese imports finally takes effect, with Beijing having vowed to respond immediately in similar measures. The Aussie trades 0.3 percent up at 0.7404, having hit a low of 0.7310 on Monday; it’s lowest since Jan 2017. FxWirePro's Hourly Aussie Strength Index stood at 88.64 (Slightly Bullish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7345, a break below targets 0.7280. On the upside, resistance is located at 0.7443 (June 22 High), a break above could take it near 0.7480 (June 15 High).

NZD/USD: The New Zealand dollar surged to a 1-week peak as the greenback eased ahead of the threatened launch of U.S tariffs on China, and the risks that might hold to trade and growth worldwide. The Kiwi trades 0.4 percent up at 0.6812, having touched a low of 0.6687 on Tuesday, its lowest level since May 2016. FxWirePro's Hourly Kiwi Strength Index was at 125.79 (Highly Bullish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6859, a break above could take it near 0.6920. On the downside, support is seen at 0.6736 (June 29 Low), a break below could drag it below 0.6700.

Equities Recap

Asian shares edged up, reversing early session losses, as investors focus shifted to how China will retaliate and the potential volatility that could cause in the global financial markets.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.1 percent.

Tokyo's Nikkei rallied 1.1 percent to 21,788.14 points, Australia's S&P/ASX 200 index gained 0.9 percent to 6,272.30 points, and South Korea's KOSPI surged 0.9 percent to 2,279.68 points.

Shanghai composite index rose 0.7 percent to 2,753.06 points, while CSI300 index was trading 0.9 percent up at 3,373.78 points.

Hong Kong’s Hang Seng was trading 0.9 percent higher at 28,453.18 points. Taiwan shares shed 0.05 percent to 10,608.57 points.

Commodities Recap

Crude oil prices steadied ahead of a raft of import tariffs expected to be imposed later in the day by the United States and China. International benchmark Brent crude was trading 0.4 percent down at $77.27 per barrel by 0456 GMT, having hit a high of $79.53 last week, its highest since May 31. U.S. West Texas Intermediate was trading 0.2 percent lower at $72.99 a barrel, after rising as high as $75.24 on Tuesday, its highest since Nov. 2014.

Gold prices nudged lower amid a steady dollar, while investors braced for any impact on global markets from a deepening trade conflict between the United States and China. Spot gold trading 0.2 percent down at $1,255.14 an ounce by 0502 GMT, having touched a low of $1237.82 on Tuesday, its lowest since Dec. 12. U.S. gold futures for August delivery were 0.4-percent lower at $1,254.10 an ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.845 percent higher by 0.006 bps, while 5-year yield was 0.003 bps up at 2.743 percent.

The yields on Australian 10-year paper have fallen 34 basis points since mid-May to stand at 2.60 percent. The three-year bond contract off 1 tick at 97.925, while the 10-year contract dipped 1.5 ticks to 97.3800.

The  New Zealand 10-year yields are at 2.84 percent, having eased from a 3.06 percent top in June.

The Canadian government bond prices were mixed across the yield curve, with the two-year down 0.5 Canadian cent to yield 1.916 percent and the 10-year rising 15 Canadian cents to yield 2.146 percent.

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