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Long On Hype, Short On Detail

Firstly, as Japan recovers from the devastation of Typhoon Hagibis, a huge congratulations to the Japan Rugby Team on the victory last night and first Rugby World Cup quarter-finals appearance this weekend. It was a game for the ages!

The Monetary Authority of Singapore (MAS) has joined the global central bank easing party this morning. In their semi-annual monetary policy statement, following a genuinely unspectacular GDP print of 0.1% YoY also just released, the MAS announced it would reduce the rate of appreciation of S$NEER policy band. (the MAS manages monetary policy via a Singapore dollar nominal effective exchange rate, and not interest rates) Despite the euphoria of “deal Friday”, it is clear that the global economy continues to slow, with the ongoing US and China trade war causing major leaks below the waterline.

Markets reacted positively to the procession of good news on the trade talk and Brexit front on Friday, but weekends worth of pondering appears to have taken the edge of expectations. Firstly, the US and China seemed to reach a deal-lite in their trade dispute on Friday. The US postponing tariff increases, due to be implemented this week, and China, in return, agreeing to buy more US agricultural commodities and making certain commitments on their exchange rate and intellectual property.

The precise details of the apparent agreement have been zero and the commitments by China, in any case, suit their situation in the here and now, particularly as swine fever has ravaged the country’s pork industry. Pointedly, Chinese press over the weekend did not even refer to the apparent trade agreement as such, despite President Trump’s self-congratulatory glee on Friday. Hardly the signs of a significant breakthrough. Both sides appear to have taken small wins that suited them both in the here and now, kicking the significant issues down the road in almost European style.

The Boris Brexit breakthrough after talks with Ireland’s Varadkar has also quickly hit a quagmire with the European Union. Eurozone negotiators and country leaders appear to be underwhelmed by the elaborate detail of the proposed Irish backstop solution. Like the apparent trade deal that isn’t above, precisely no details of the nuts and bolts of Messrs Johnson and Varadkar’s breakthrough conversation of last week have been released.

The EU’s chief Brexit negotiator said as much over the weekend, and Eurozone officials labelled today’s talks between officials of both sides as the “last chance” to secure a solution. We shouldn’t expect Julie Andrews to be singing Brexit’s done from the roofs of London then. The Sterling appreciated 5.5% last week on deal hopes and has given up over one per cent of that already since. The danger is that it may give up a lot more than that.

Geopolitical watchers should keep an eye on Syria this week. Turkey’s invasion of Northern Syria to secure a “safe-zone”, while also eliminating as many Kurdish fighters in the process as it could, has hit a significant snag. The US announced it is withdrawing all its remaining troops from Syria. Simultaneously, the Kurdish leaders announced over the weekend, that they had secured an agreement with the Syrian government and its principal backers, Russia and Iran, to enter Kurdish territory and deploy along Syria’s northern border.

Armies and air forces from opposing sides manoeuvring and conducting operations in close proximity to each other is a hazardous business. Incidents and accidents can and do happen and often lead to escalating outcomes. The Kurdish agreement likely signals the beginning of the end of Syria’s long and tragic civil war, but it turns the risk temperature up to red-hot, centred on the border with Syria and Turkey. An Iranian oil tanker was struck by two missiles on Friday sending oil prices higher as well. Anyone who thinks the Middle East is off the radar as a flashpoint this week is dead wrong.

Overall the week will start on a long on hype, short of detail sense of deja-vu. A Japan holiday will take the edge of volumes and volatility, but I would expect the exuberance of North America’s Friday, to be much harder to duplicate in Asia today.

China will release its balance of payments data at 1030 SGT this morning with markets anxiously watching the import component in particular. A fall similar to last months 5.6%, will send shivers through the region.


Japan has a public holiday today, but the Australian ASX has moved cautiously higher by 0.55%. The South Korean Kospi has shown more life, rallying 1.2% in early trade.

Wall Street finished on a high on Friday after the apparent trade mini-deal between the US and China. The S&P 500 rose 1.09%, the Nasdaq rose 1.34%, and the Dow Jones rose 1.2%.

Markets will be awaiting China’s balance of payment data before getting too excited by last Friday’s light on detail, trade and Brexit news. Another weak import component will probably temper any bullish inclinations for the region.


Sterling’s retreat has continued in Asia this morning, falling 0.40% to 1.2590 after touching 1.2700 on Friday. The optimism of no 10 Downing Street has not been matched by European negotiating officials with some stern words from them for London over the weekend. A failure to make concrete progress today leaves GBP vulnerable to giving back a lot more of its impressive rally of last week. GBP has nearby technical support at 1.2585, but none after that until 1.2500.

The New Zealand dollar is the morning’s other big mover, falling 0.40% to 0.6310 following abysmal polling numbers over the weekend for the government. Poor data from China today could administer a coup-de-grace to the trade-sensitive Kiwi, endangering recent support at 0.6280.

The US dollar spent Friday on the back foot as it wilted under trade optimism, the dollar index fell 0.43% to 98.27. That optimism has probably been tempered over the weekend, and although regional currencies will gain some benefit to Friday’s lower dollar, it will not likely be to the same extent.


Oil prices leapt by two per cent in Asia on Friday following reports that two missiles had struck an Iranian oil tanker. Oil remained bid for the rest of the session on trade optimism, but worryingly, did not continue its initial rally once this detail emerged.

Brent Crude spot rose 1.88% to regain the $60 handle, closing at $60.60 a barrel. WTI spot rose 1.85% to $54.95 a barrel. This morning, both contracts have eased initially as reality bites on the actual scope and details of the supposed trade deal.

Both contracts are lower by 0.50% to $60.60 and $54.50 a barrel, respectively. The China trade balance will be oil’s next hurdle, but the deteriorating situation in the Middle East remains of traders’ radars this week at their peril.


Gold fell as low as $1475.00 an ounce on Friday but recovered on weekend risk hedging to finish at $1489.00 an ounce, after a near 30 dollar intra-day range. Gold’s intra-day ranges and volatility may be impressive, buffeted by trade winds, but is unable to manage a meaningful recovery above $1500.00, which will give bullish traders food for thought.

Gold has traced out substantial technical resistance at $1520.00 an ounce with support at 1474.00, Friday’s low, and last weeks low at $1459.00 an ounce.

Gold’s fate is not it’s own in the bigger picture; the outcome of the trade war will decide that. The street certainly appears to have much stale long positioning, with only an escalation in the Middle East likely to give them hope in the near-term. Muted trade optimism and the unwinding of weekend risk hedging has seen it fall slightly in Asia to $1486.00 an ounce.

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 [4]

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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