OANDA trading Asia market update

Asia trading update

Asia market continues to observe the Euro move lower, primarily from the sidelines as local trader keep ploughing all into the short AUD trade which offers both a proxy into China risk and a pragmatic play versus the widening  US interest rate differentials,  as the RBA sits in the realm of dovish G-10 central banks.

AUD/USD breaches 0.71 despite positive trade data

But on the EURUSD,  according to data compiled by Bloomberg, there’s a chunky 1.1450 call strike with a notational 1.5 billion expiring Oct 5 / 18, which could be a significant battle zone over the next 24 hours.

Chinese Yuan
We are starting to see and fell some regional markets consternation with USDCNH breaking above 6.90 which was previously thought to be a Pboc line in the sand, but most market participants were convinced it somewhere toward the 7.0 USDCNH, none the less its rising more than a few eyebrows from local investors. However, I’m not viewing this move as anything but the bullish dollar narrative unfolding and post FOMC. I continue to see the FOMC move restrictive territory if the data support and the terminal Fed fund rate higher, and it’s improbable that the US Treasury can make any argument for currency manipulation in this case.

The markets are looking for a possible test of 6.93-95 level as this bullish dollar narrative unfolds after the key 6.90 USDCNH gave way.

Asia Stocks
Asia stocks are not faring so well which is not so untypical when the USD dollar strengthened markedly versus Asian currencies notably vs the Yuan which is a crucial bellwether of local sentiment. But with US Treasuries busting a move higher even local bond investor is looking stateside at juicy bond yields. And while I very much in the bullish long-term camp for Asia equities, I think the resulting flights of capital via regional market rotation out of Asia into the US is just part of a natural portfolio rebalancing act on the initial wave of dollars strength and should not be construed as a significant regional risk-off bias

No central bank in the world has anywhere near the war chest the Pboc has to the right the ship. It will take some patience, but three months down the road we should start to see a shift higher in mainland economic data after the Pboc stimulus efforts.

Oil markets

I’m desperately trying not to be unabashedly bullish. But Brent remains firm and unshakable no matter what’s thrown at it. Whether a vast US inventory builds, or Saudi and Russia supply, the markets stay unwavering and singularly focused on Iran sanction and the ambiguity of OPEC’s amplitude to increase production quickly enough to offset any Iran supply loss. In other words, the market is focusing on spare production capacity and the US sanctions effectively drying up the physical demands.

Saudi -Russia supply and a huge US inventory build tempers Oil bulls

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.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and 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

Latest posts by Stephen Innes (see all)