Asia Quiet on a Tokyo Holiday

Trading across all asset classes has been subdued in Asia today with a holiday in Tokyo and ahead of Thanksgiving in the United States.

The market continues to catch its breath after an exciting two weeks with only AUD/USD showing signs of life in Asia trading today. AUD was buoyed by more frenzied buying of Iron Ore Futures in China with the Dalian Iron Ore contract finishing the day 4.5% yup! This dragged AUD through resistance at 7400 and up 50 points to 7450. As the chart shows though AUD remains a long way from trendline resistance at 7615 and also has the 100 and  200-day moving averages at 7589 and 7520 respectively, so plenty of wood to chop technically.

AUDUSDDaily

AUD/JPY buying was around as well reflecting traders appetite for anything “risk on” at the moment. With USD/JPY regaining  the 111.00 handle the cross is now attacking a multiple daily top and resistance at 82.55. A Daily close above this level suggesting a move is possible to above  84.00.

AUDJPY

BUNDS

German 2-Year yields hit a record low today of -0.74 %.

GERMANY’S TWO-YEAR GOVERNMENT BOND YIELD HITS RECORD LOW OF MINUS 0.74 PERCENT – TRADEWEB

The US 10-year vs German 10-year spread hit a record high of +206 points overnight. The 10 year Bund has traded higher in price terms (ie yield lower) after the recent global bond sell-off.  There a couple of factors at work here that may well keep Bund yields low or tracking lower. One, the ECB will almost certainly extend their QE programme for at least another 6 months. Two, storm clouds are gathering in Europe with the Italian referendum on December  4th and a number of Federal Elections in Europe next year.

This could see a rotation out of peripheral and Club Med countries bonds and into quality German made Bunds. The safe haven status of Bunds within Europe could see spreads with the periphery blowing out going forwards.

BundDaily

DAX

No such problems with German stocks though. Following Wall Street’s lead and with yields going lower again, the DAX is re-testing a multiple daily high at 10792.

DAXDaily

ASX

Ditto the ASX, getting a sugar rush from both Wall Street and booming commodity prices on China’s futures exchanges. Like the DAX, it is testing a multi-day high here at 5495 as Australias resource heavy index basks in an iron ore afterglow.

ASXDailyEUR/GBP

This is an interesting chart. Maybe there is life in GBP yet and the post-Brexit meltdown is fading? Or perhaps it is that EUR in 2017 will become the much larger of two evils. The 100-day moving average has held multiple times on top and is now formidable resistance at 8632. EUR/GBP is approaching trendline support at 8445.

EURGBPDaily

As we head into the mass extinction event of turkeys we know as Thanks Giving, there is clearly still an appetite, albeit subdued, for risk on trades. Be it via high yielders or commodities. I am still pondering how Equities in general, can continue to be so bullish in the face of higher US bond yields but as the saying goes, “the market can stay irrational, longer than you can stay solvent.”

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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