Asia Morning: Asia Shrugs Off Trade Fatigue

Asia is off to a bright start today, perhaps reflecting a relatively quiet night in North America, with no new visibility from either the US or China on the trade front.

Yesterday we had abysmal data from regional heavyweights China and Japan, which bought a dose of reality back to global recovery investor herd. The world’s economy has slowed, and an interim trade deal will not be an instant magic panacea to solve that, rather a band-aid to staunch the bleeding. If anything, it signals that more easing by regional central banks and monetary authorities is ahead, and may explain the rally in equities across Asia today. A negative sentiment bullish rally, who would have thought?

Overnight we saw US yields continue to ease from recent highs with the 10-years now trading 10bps lower on the week around 1.80%. The dollar also eased as trade deal fatigue set in on Wall Street, which is showing signs of losing patience with the slow progress. The fact that China and the US cannot agree even to buy/sell some pork, lower a few tariffs, and decide where to sign an interim deal, does not bode well. For either an intermediate agreement or a final one next year, where much more complicated issues will have to be addressed.

The daily flip-flopping in sentiment this week is a sign that the global FOMO trade-deal recovery trade has been locked and loaded, and with no extra magazines, momentum, and patience, is waning. I would love to be proven wrong, but one suspects that without any news this week, the fire hazard level for bullish positioning will reach dangerous next week.

Asia’s calendar is quiet with NZ Business PMI and Indonesia Balance of Trade both outperforming this morning providing a modicum of good news. Malaysia releases Q3 GDP Growth at 1200 SGT and is expected to rise by 4.90% YoY. Shortly after at 1230 SGT, Japan releases Final Industrial Production for September with a 1.10% rise YoY expected. On a quiet day, either or could have a more outsized effect on market sentiment than would usually be expected, especially if they underperform.

Hong Kong’s government denied they planned to impose a curfew on the territory this weekend, which Asia greeted with relief after growling from Beijing yesterday on the security situation. It was a relatively quiet day on the protest front by recent standards and has probably given Asian markets a sigh of relief this morning. Off course, the situation could change rapidly, and the Hong Kong factor is perhaps the main reason for Asia’s divergence from Europe and North America this week. As conferences, seminars and meetings are cancelled in Hong Kong left right and centre, it is pleasing to note that the Hong Kong Seven’s rugby tournament will still be going ahead. Proving the rugby, camaraderie and lots of beer always rises above politics.


North America had another sideways day overnight, with the S&P 500, Nasdaq and Dow Jones all mostly flat on the day. Wall Street’s rallies have been more incremental this week, more crawling up the beach under gunfire than storming ahead unopposed. Although all three indices sit at or near all-time highs, a new impetus is needed from the trade negotiations. If it doesn’t come, things may get emotional.

Asia, having underperformed North America all week is off to a bright start today. The Nikkei and Kospi are 1.0% higher; the ASX 200 is 0.70% higher, with the Straits Times Index 0.25% higher. Even the Hand Seng has risen this morning by 0.40%.

Only mainland China is lagging, with the Shanghai Comp and CSI 300 down 0.40%; likely still feeling the hangover from yesterday China retails sales and industrial production disappointment.

A quiet night in Hong Kong and a denial of an impending curfew has allowed regional markets to make up some lost time on other geographical regions today. That could, of course, change in an instant, should negative news break. However, for now, no news is good news.


The dollar gave up some ground overnight as Treasury yields continued easing and nervous investors started rotating back into haven currencies. The USD/JPY fell o.40% to 108.20 and has formed a daily double top at 109.50 with support at 108.00. The USD/CHF fell 0.20% to 0.9880 with strong technical resistance now between 0.9980 and 1.0000 and support nearby at 0.9860. Further progress by haven currencies against the dollar will depend on trade negotiations news, but further gains may be possible into the weekend as investors hedge event risk.

The USD/CNH fell 0.20% to 7.0065 today after the PBOC set the daily fix at 7.0091. Moderate dollar weakness, plus an unwillingness to let the onshore Yuan fall too much while delicate trade negotiations continue explains most of the USD/CNH drop.

Regional currencies are in hibernation mode today, wary of headline shocks from the trade talks and Hong Kong.


Both Brent crude and WTI tested the upside in overnight trading, but failed yet again, as US official Crude Inventories showed an unexpected rise of 2.22 million barrels and gasoline stocks unexpectedly rose by 1.86 million barrels. Brent crude fell 0.30% to 462.30 a barrel and WTI fell 0.80% to $56.90 a barrel.

Both contracts have now traced out strong technical resistance. On a spot basis, Brent crude has resistance at $63.25, and WTI has resistance at $58.00 a barrel. As with equity markets, oil probably needs some new impetus from the trade discussions to make material progress higher in the near term.

Both contracts have rallied modestly in Asia, reflecting the relief at a quiet night in Hong Kong and also possibly, weekend risk hedging. Brent has risen 0.40% to $62.70, and WTI has risen 0.30% to $57.20 a barrel.


Gold was the primary beneficiary of a combination of trade fatigue, lower US yields and a slightly weaker dollar overnight. It rose sharply by 0.55% to $1471.50 an ounce. Gold, however, has formidable resistance at the $1480.00 region which should prove challenging to overcome ahead of the weekend.

Gold itself remains entirely at the mercy of trade sentiment and has moved slightly lower to $1466.60 an ounce this morning as Asia’s risk appetite has returned. That said, gold has now rallied some 25 dollars from its lows earlier this week, meaning much of the initial sell-offs corrective rally has now run its course.

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, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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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