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Asia Roundup: Antipodeans slumps, dollar index gains as U.S. threatens more tariffs on Chinese goods, Asian shares plunge – Wednesday, July 11th, 2018

Market Roundup

  • U.S. ramps up trade row with China, threatens new tariffs
     
  • China says plans by U.S. for additional tariffs completely unacceptable
     
  • Trump's Supreme Court nominee Kavanaugh woos U.S. Senate
     
  • May presses on with Brexit plan after high-profile resignations
     
  • Japan May Machinery Orders Y/Y, 16.5%, 8.6% f'cast, 9.6% last
     
  • Australia Jul Consumer Sentiment, 3.9%, 0.3% last
     

Economic Data Ahead

  • No major economic data releases

Key Events Ahead

  • (0300 ET/0700 GMT) Opening address by ECB President Mario Draghi at 9th ECB Statistics Conference in Frankfurt
     
  • (0330 ET/0730 GMT) ECB Chief Economist Peter Praet participates in chairing Session 1 of 9th ECB Statistics Conference in Frankfurt
     
  • (1130 ET/1530 GMT) BOE Gov Mark Carney speaks at a conference on the Global Financial Crisis hosted in Massachusetts
     
  • (1300 ET/1700 GMT) French Economy Minister Bruno Le Maire and his German counterpart Peter Altmaier hold a joint news conference
     

FX Beat

DXY: The dollar index extended gains for the third consecutive session after U.S. Trade Representative Robert Lighthizer said the United States would impose tariffs of 10 percent on additional Chinese imports worth $200 billion. The greenback against a basket of currencies trades 0.1 percent up at 94.24, having touched a low of 93.71 on Monday, its lowest since June 14. FxWirePro's Hourly Dollar Strength Index stood at 119.05 (Highly Bullish) by 0500 GMT.

EUR/USD: The euro declined, extending previous session losses after data released on Tuesday showed the sentiment among German investors slumped in July to its lowest level since August 2012, weighed down by concerns about escalating trade tensions with the United States. The European currency traded 0.1 percent down at 1.1726, having touched a high of 1.1790 on Monday, its highest since June 14. FxWirePro's Hourly Euro Strength Index stood at 8.63 (Neutral) by 0500 GMT. Investors’ attention will remain on ECB President Draghi, Praet, and Mersch's speech, ahead of U.S. producer price index and wholesale inventories. Immediate resistance is located at 1.1801 (June 13 High), a break above targets 1.1852 (June 14 High). On the downside, support is seen at 1.1680 (July 6 Low), a break below could drag it till 1.1630 (July 4 Low)

USD/JPY: The dollar rose, extending gains for the third straight session after the Trump administration said it would impose 10 percent tariffs on an extra $200 billion worth of goods imported from China, escalating tensions between the world's two biggest economies. Last week, Washington imposed 25 percent tariffs on $34 billion of Chinese imports, while Beijing responded immediately with matching tariffs on the same value of U.S. goods exported to China. The major was trading 0.1 percent up at 111.06, having hit a high of 111.35 the day before, its highest since May 21. FxWirePro's Hourly Yen Strength Index stood at -74.46 (Bearish) by 0600 GMT. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. producer price index and wholesale inventories. Immediate resistance is located at 111.39 (May 21 High), a break above targets 111.48 (Jan 18 High). On the downside, support is seen at 110.62 (10-DMA), a break below could take it lower 110.28 (July 4 Low).

GBP/USD: Sterling eased, reversing some of its previous session gains, as resignations of Foreign Secretary Boris Johnson and Brexit Minister David Davis rattled May's grip and triggered talk of a leadership challenge less than nine months before Britain separates from the European Union. The major traded 0.1 percent down at 1.3260, having hit a high of 1.3362 on Monday; it’s highest since June 14. FxWirePro's Hourly Sterling Strength Index stood at 52.78 (Bullish) 0500 GMT. Investors’ attention will remain on UK NIESR GDP Estimate, ahead of U.S. fundamental drivers. Immediate resistance is located at 1.3362 (June 1 High), a break above could take it near 1.3389 (June 13 High). On the downside, support is seen at 1.3231 (21-DMA), a break below targets 1.3200. Against the euro, the pound was trading 0.05 percent up at 88.44 pence, having hit a low of 89.00 pence on Monday, it’s lowest since March 9.

AUD/USD: The Australian dollar slumped after the United States threatened to impose further import duties on Chinese goods, triggering worries of a full-blown trade war. The Aussie trades 0.6 percent down at 0.7417, having hit a high of 0.7483 the day before; it’s highest since June 14. FxWirePro's Hourly Aussie Strength Index stood at -120.05 (Highly Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7393 (10-DMA), a break below targets 0.7376 (July 6 Low). On the upside, resistance is located at  0.7500, a break above could take it near 0.7547 (May 17 High).

NZD/USD: The New Zealand dollar tumbled, as crude oil prices fell after the United States said it would consider requests from some countries to be exempted from sanctions it will put into effect in November that prevents Iran from exporting oil. The Kiwi trades 0.4 percent down at 0.6810, having touched a high of 0.6858 on Monday, its highest level since June 27. FxWirePro's Hourly Kiwi Strength Index was at -103.53 (Highly Bearish) by 0500 GMT. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.6883, a break above could take it near 0.6920. On the downside, support is seen at 0.6786 (10-DMA), a break below could drag it below 0.6736 (June 29 Low)

Equities Recap

Asian shares declined, following a sell-off in Chinese markets as U.S. threats of tariffs on an additional $200 billion worth of Chinese goods escalated tensions between the world's two biggest economies.

MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 1.1 percent.

Tokyo's Nikkei slumped 1.1 percent to 21,957.36 points, Australia's S&P/ASX 200 index eased 0.8 percent to 6,211.20 points, and South Korea's KOSPI plunged 0.5 percent to 2,283.38 points.

Shanghai composite index fell 2.3 percent to 2,762.62 points, while CSI300 index was trading 2.2 percent down at 3,390.64 points.

Hong Kong’s Hang Seng was trading 1.7 percent lower at 28,201.23 points. Taiwan shares shed 0.7 percent to 10,676.84 points.

Commodities Recap

Crude oil prices declined, retreating from recent peaks after U.S. President Donald Trump threatened to levy new trade tariffs on China. International benchmark Brent crude was trading 0.9 percent down at $78.19 per barrel by 0447 GMT, having hit a low of $76.35 on Friday, its lowest since June 27. U.S. West Texas Intermediate was trading 0.7 percent lower at $73.61 a barrel, after rising as high as $75.24 last week, its highest since Nov. 2014.

Gold prices eased as the dollar steadied against the Chinese yuan after the United States threatened to impose additional tariffs on Chinese goods, escalating trade tensions between both the economies. Spot gold fell 0.4 percent at $1,250.81 an ounce at 0456 GMT, having touched a high of $1265.79 on Monday, its highest since Jun. 26. U.S. gold futures for August delivery were 0.3 percent lower at $1,251.90 an ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.836 percent lower by 0.037 bps, while 5-year yield was 0.037 bps down at 2.734 percent.

The Australian government bond futures gained, with the three-year bond contract up 2.5 ticks at 97.930. The 10-year contract added 2 ticks to 97.380.

The New Zealand government bonds rose on a general safe-haven bid, sending yields about 2.5 basis points lower at the long-end and half basis point at the short-end.

The Canadian government bond prices were higher across a flatter yield curve, with the two-year up 1 Canadian cent to yield 1.939 percent and the 10-year up 14 Canadian cents to yield 2.153 percent. The two-year yield touched its highest intraday level since May 25 at 1.959 percent.


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