Market Awaits Next Key Driver

In commodity markets, the focus was on oil. The WTI rose some 5% as a meeting between energy ministers from Russia and Saudi Arabia raised hopes that a  production freeze announcement would occur at next month’s OPEC meeting in Algiers. However, when the Saudi oil minister stated there is no explicit agreement and further commented that there is nothing decided on output, with nothing forthcoming, in typical buy the rumour, sell the fact fashion, oil prices plummeted lower.

Australian Dollar

The Australian Dollar continues to perform well as Aussie dollar bulls have some breathing room as the odds for a  September  US interest rate lift-off has considerably decreased.

Also, the” risk on”appeal from a ” Goldilocks ” type NFP number has underpinned the Aussie, as it has with most commodity-related currencies.

We have the RBA later today. While the markets are expecting no change in the Bank’s policy rate, the Aussie dollar remains supported approaching the key .7600 level  in the pre-announcement trade as traders are expecting a  hawkish rather than a dovish course from the accompanying statement, especially in the wake of the recent run of buoyant domestic economic data.

Japanese Yen

The Yen continues to be the primary driver of USD sentiment.  While glued near 103.40 most of Europe as well as through a holiday-thinned US markets, there has been some absorbing price action.

Besides the ongoing abstractions and debate surrounding the vagaries of the US Non-Farm Payroll report, Governor Kuroda Speech at  Kisaragi-kai Meeting in Tokyo, continues to resonate.

While delivering his customary “whatever it takes “ stance regarding  BoJ stimulus, the Central Bank is apparently weighing earlier FSA warnings by referencing the negative impact that  NIRP has on financial institutions.

Kuroda’s guarded comments sent USDJPY lower as the market awaits the next US Dollar driver.

The current move in USDJPY  is running counter to the technical setup which favors a move through 104. Also, Bond Yield’s and  Bond flows are currently not supportive of a stronger Yen outlook.

Regardless of set ups  , there continues to be a lot of moving parts in this discussion and the jury’s out on the next significant USDJPY move.

Yuan

Traders are stuck in no man’s land with markets held in neutral. While expectations for a September US interest rate lift-off are diminishing, it’s likely a  short-term reprieve for the  Yaun  as it continues to trade with a long-term bias towards a gradual rate of depreciation.

There is still a substantial likelihood the Federal Reserve Board will raise interest rates in 2016, and this should continue to weigh on Yaun near-term sentiment.

Also, Traders are less inclined to rock the RMB boat ahead of October  Yuan  SDR inclusion  Market is likely to stay neutral up until the BoJ meetings Sept 20-21  if not through to the October SDR composition.

USDASIA

I suspect the markets were fundamentally flat going into NFP and have been slow to re-engage Long EM Asia position primarily driven by the uncertainty regarding US interest rates . Even the movements in Oil prices overnight failed to get much of a rise from Ringgit dealers.

Given range trade mentality expect exporter offers to come in 4.08 with USD support at 4.05

Stephen Innes

Stephen Innes

Senior Currency Trader and Analyst at OANDA
Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA. After having started his trading career with NatWest Bank, he is currently based in Singapore as a Senior Currency Trader and Analyst with OANDA, focusing on the movement of the Aussie Dollar and ASEAN Currencies. Stephen has an extensive trading experience in Interest Rate Futures, Money Markets and Precious Metals. Prior to joining OANDA, he worked with organizations like Cambridge Mercantile, Nat West, Garvin Guy Butler, Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

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