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Asia Roundup: Aussie declines as rise in unemployment stoke rate cut speculation, yen off 1-1/2 month low after BoJ stands pat but signals chance of easing, investors eye BoE policy decision- Thursday, September 19th, 2019
Economic Data Ahead
Key Events Ahead
DXY: The dollar index slightly edged lower after the Federal Reserve cut interest rates by a quarter of a percentage point, as expected, but gave an uncertain outlook on future easing. The new projections showed seven of 17 policymakers projected one more quarter-point rate cut in 2019, two members voted against the rate cut, while one member wanted a 50bps cut. The greenback against a basket of currencies traded 0.1 percent down at 98.44, having touched a low of 97.86 on Friday, its lowest since August 26.
EUR/USD: The euro gained, reversing some of its previous session losses, as the eurozone markets were still benefiting from last week’s European Central Bank easing. On Wednesday, the major tumbled as the greenback rose moderately across the board following the release of the FOMC statement. The European currency traded 0.1 percent up at 1.1038, having touched a high of 1.1109 on Friday, its highest since August 27. Investors’ attention will remain on a series of data from the Eurozone economies, EZ current account and ECB officials speeches, ahead of the U.S. unemployment benefit claims and existing home sales. Immediate resistance is located at 1.1084 (September 5 High), a break above targets 1.1109 (September 13 High). On the downside, support is seen at 1.1015 (September 9 Low), a break below could drag it below 1.0963 (August 30 High).
USD/JPY: The Japanese yen surged, retreating from multi-week lows after the Bank of Japan kept monetary policy steady but signaled the chance of expanding stimulus as early as its next policy meeting in October by issuing warning over the risks threatening the economy. On Wednesday, the pair rallied to a 1-1/2 month peak after the U.S. Federal Reserve cut interest rates again to help sustain a record-long economic expansion but signalled a higher bar to further reductions in borrowing costs. The major was trading 0.5 percent down at 108.87, having hit a high of 108.47 earlier, its highest since August 1. Investors’ will continue to track the broad-based market sentiment, ahead of the U.S. unemployment benefit claims and existing home sales. Immediate resistance is located at 108.63 (July 5 High), a break above targets 108.99 (July 10 High). On the downside, support is seen at 107.52 (September 12 Low), a break below could take it lower at 106.89 (21-DMA).
GBP/USD: Sterling steadied after German Finance Minister Olaf Scholz warned that Germans face trade bottlenecks if Britain leaves the European Union without a deal due to the effect of new tariffs and extra customs checks. The major traded 0.1 percent up at 1.2471, having hit a high of 1.2526 on Thursday, it’s highest since July 25. Investors’ attention will remain on the development surrounding Brexit, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.2522 (July 24 High), a break above could take it near 1.2558 (July 18 High). On the downside, support is seen at 1.2384 (10-DMA), a break below targets 1.2282 (21-DMA). Against the euro, the pound was trading 0.1 percent down at 88.50 pence, having hit a high of 88.42 on Wednesday, it’s highest since May 30.
AUD/USD: The Australian dollar plunged to a 2-week low after domestic data showed employment rose in August but the jobless rate worsened to a one-year high of 5.3 percent as more people looked for work, a sign of spare capacity in the labor market that reinforced expectations of a rate cut as soon as the Reserve Bank of Australia's next policy meeting on Oct. 1. The Aussie traded 0.6 percent down at 0.6789, having hit a low of 0.6781 earlier, it’s lowest since September 4. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.6773 (August 21 Low), a break below targets 0.6735 (September 14 Low). On the upside, resistance is located at 0.6861 (July 31 High), a break above could take it near 0.6916 (September 6 High).
NZD/USD: The New Zealand dollar eased to a 2-1/2 week trough, weighed down by rising greenback and expectations of monetary easing in New Zealand. On Wednesday, the major surged after New Zealand’s June-quarter gross domestic product came in higher than expectations, however, it closed lower as recent weakness in Retail Sales, Construction and Manufacturing numbers raised concerns as to how the growth figures can affect the Reserve Bank of New Zealand decision later in the month. The Kiwi trades 0.05 percent down at 0.6311, having touched a low of 0.6298 earlier, its lowest level since September 3. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6359 (10-DMA), a break above could take it near 0.6429 (August 20 High). On the downside, support is seen at 0.6269 (September 3 Low), a break below could drag it below 0.6235.
Asian shares tumbled after the U.S. Federal Reserve cut interest rates as expected but signalled further cuts are unlikely as the labour market remains strong.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4 percent.
Tokyo's Nikkei gained 0.5 percent to 22,063.98 points, Australia's S&P/ASX 200 index rallied 0.6 percent to 6,781.50 points and South Korea's KOSPI surged 0.3 percent to 2,076.93 points.
Shanghai composite index rose 0.1 percent to 2,988.40 points, while CSI 300 index traded 0.1 percent up at 3,913.45 points.
Hong Kong’s Hang Seng traded 1.1 percent lower at 26,473.84 points. Taiwan shares shed 0.3 percent to 10,894.70 points.
Crude oil prices steadied after days of turbulence, supported by Saudi Arabia’s pledge to restore full production by end-September at facilities knocked out in drone and missile attacks last weekend. International benchmark Brent crude was trading 0.1 percent higher at $63.66 per barrel by 0438 GMT, having hit a high of $69.64 on Monday, its highest since May 30. U.S. West Texas Intermediate was trading 0.1 percent up at $58.23 a barrel, after rising as high as $63.33 on Monday, its highest since May 21.
Gold prices eased as investors remained cautious after the U.S. Federal Reserve cut interest rates as expected but delivered mixed signals about its next move. Spot gold was trading lower at $1,493.60 per ounce by 0440 GMT, having touched a low of $1,483.06 on Thursday, its lowest since August 13. U.S. gold futures were down 1.2 percent at $1,497.5 per ounce.
The Japanese government bond prices rose, extending gains after the Bank of Japan kept its policy on hold. The 30-year JGB yield fell 4 basis points to 0.290 percent, off 1-1/2-month high of 0.350 percent touched earlier in the day. The 20-year JGB yield fell 3.5 basis points to 0.155 percent, off Wednesday’s high of 0.220 percent, its highest since early August. The 10-year JGB yield fell 3.5 basis points to minus 0.220 percent, while the price of benchmark 10-year JGB futures rose 0.36 point to 154.67. At the shorter end of the curve, the two-year JGB yield fell 2 basis points to minus 0.290 percent, while the five-year yield fell 3 basis points to minus 0.325 percent,
The Australian 10-year government bond yield slumped to over 1-week low after the Federal Reserve cut the federal funds rate by 25 basis points to 1.75-2.00 percent at its monetary policy meeting in the overnight session. he yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 7-1/2 basis points to 1.1061 percent, the yield on the long-term 30-year bond also slumped 7 basis points to 1.665 percent and the yield on short-term 2-year plummeted 7-1/2 basis points to 0.797 percent.