Asian Holidays See Sideways Price Action

Regional heavyweights China, Japan and South Korea are all on holiday today, a turn of affairs that leaves the rest of Asia content to follow Wall Street on a quiet news day. Big tech rallied late in the session overnight, lifting Wall Street equity indexes to a positive close after a mostly negative day.

Big techs performance should not overshadow the negative issues that hung over markets for most of yesterday. European PMI’s followed Asia’s and posted nightmarish falls. Hong Kong GDP shrunk by nearly 9.0% on a YoY basis. That mostly confirmed the damage wrecked by the COVID-19 pandemic shutdown if anyone had somehow missed the 25 million American job losses over the past month.

That is undoubtedly being balanced out by the wave of partial re-openings of economies around the world. From New Zealand and Australia to Germany and much of Europe, including the Spain and Italy epicentres, countries are quietly emerging from OVID-19 lockdowns. Indeed, that is a story that oil markets have liked and goes some way to explaining black gold’s outperformance this week. The US to has hopped on the reopening bandwagon, even as President Trump upped the American death toll to North of 100,000. The rush to reopen may prove premature in some cases, COVID part-2 could yet crash the party, as is pricing a rapid return to normalcy. That is hopelessly naive, of course, and in no way priced into the world’s very disconnected from reality financial markets. That time will come, but not this week.

More worrying, and somewhat lost in Wall Street’s late rally, is the continuation of the China-bashing rhetoric from the US administration. Last night it was Treasury Secretary Steve Mnuchin’s turn, berating China for not buying enough US goods as per the January trade agreement. A populist backlash against China, leading to renewed trade hostilities has been mostly ignored by financial markets so far. They should have learnt by now that the US President is ignored at your peril. Even more so in an election year. As it is, China will likely be a loser from COVID-19, with supply lines “onshored” nationally around the globe regardless of the cost. China has won few friends from the pandemic, and its sabre-rattling regionally will increase the urgency to reduce supply chain dependency on them, if they are not careful.

Although the heavyweights are closed today in Asia, we do have central bank rate decisions from the Reserve Bank of Australia (RBA) at 1230 SGT, and Bank Negara Malaysia (BNM) at 1500 SGT. Interspersed between at 1300 SGT is Singapore Retail Sales where we expect a 9.0% fall as the extended domestic lockdown delivers another rabbit punch to the City-states economy.

The RBA will leave rates unchanged at 0.25% and will undoubtedly continue to expound their very dovish outlook, their commitment to maintaining a 0.25% yield curve out to three years, and an ongoing “whatever it takes” monetary commitment to support the economy. BNM is likely to shave 50 basis points of their reference rate, cutting from 2.50% to 2.0%, a record low. Malaysia ended its lockdown officially yesterday and has released a stimulus package totalling 17.5% of GDP, BNM will be expected to do its part for the recovery effort. It will be the 3rd cut in a row for BNM and should be supportive of Malaysian equities. A 25-basis point cut only, will disappoint local markets.

Equities drift higher in Asia following Wall Street.

Equities have drifted higher in Asia as US equity futures continue their rally in aftermarket trading. With Japan, China and South Korea away and no headlines of note, passively following Wall Street’s late rebound is the path of least resistance.

Singapore has risen 1.0%, along with Australia. Kuala Lumpur and Jakarta are 0.80% higher with Hong Kong climbing 0.45%. Malaysian stocks could be vulnerable to a pullback if BNM cuts by less than 50bps this afternoon.

Wall Street’s rally happened late in the day and was entirely driven by big-tech. Across the rest of the market, the news was universally gloomy with nerves also frayed by possible US-China trade tensions flaring up. Europe may not be so inclined to follow Wall Street so blindly, and that could take the edge of Asian equities this afternoon.

Safe-have flows continue to bolster the US Dollar.

The US Dollar and currency markets, in general, were having none of the exuberance shown by equities on Wall Street late in the day. Safe-haven flows into the US Dollar continued apace, with the Euro. Pound, commodity currencies and emerging markets all giving ground to the greenback. The dollar index climbed 0.45% overnight to 99.52, maintaining those gains today.

EUR/USD failed at its 100-day moving average at 1.0970, falling 0.70% to 1.0900 this morning. The tentative reopening of European economies failing to deliver a meaningful boost to the single currency. EUR/USD looks set for a deeper correction with the next support at 1.0800.

GBP/USD has formed a double top resistance at 1.2650 with the Pound retreating to 1.2460 over the last two sessions. With most of the good news priced into GBP for now, further losses are possible. GBP/USD has support at 1.2400 and then 1.2200, with a test of the latter no beyond the realms of possibility this week.

Offshore Chines Yuan, the USD/CNH, tested 7.1600 yesterday but has since fallen back to 7.1160. Likewise, its onshore equivalent, the USD/CNY has fallen from 7.0900 to 7.0600 today. Despite the increasing anti-China rhetoric emerging from Washington DC and elsewhere, and a strong US Dollar globally, USD/CNH and CNY have both fallen. That implies that the PBOC, despite China being on holiday, is around actively capping US Dollar gains.

China has to tread a delicate path from here with both the onshore and offshore Yuan’s having weakened recently. A rise in USD/CNH through 7.2000, and a rise of USD/CNY through 7.1500, is likely to spark fears that China is happy to weaken its currency to support exports. True or not, that will almost certainly provoke a response from Washington DC. With trade tensions rising, and US Administration following a populist anti-China reelection path, China must be careful not to walk into a currency trap.


Oil staged a strong rally overnight that has continued this morning in Asia, as financial market asset classes spent the overnight session diverging in their outlooks. Equities and oil are most definitely in the global recovery bullish corner for now. Oil is being boosted by the easing or ending of lockdowns across the world, and the OPEC+ production cuts coming into force.

Brent crude rose 5.10% to $27.95 a barrel overnight and has risen 1.50% this morning to $28.40 a barrel. WTI futures rose 6.0% overnight to $21.00 a barrel, climbing 1.50% in Asia to $21.85 a barrel. The bullish momentum still appears to be in the ascendant with both contracts.

However, the 100-day moving averages lie not too distant at $32.00 and $26.50 a barrel, respectively. Both will be challenging resistance levels, and should either test them, a considerable amount of good news will be built into oil prices. Probably far too much in fact. Caution should be exercised at these levels from here on higher.


Gold continues to experience impressive $30 ranges intra-day, with equally unimpressive almost unchanged close concluding the day. Such was the case overnight, with gold trading between $1670.00 and $1715.00 an ounce, only to close unchanged from the previous day at $1700.00 an ounce.

The price action suggests that gold remains the domain of intra-day momentum traders and not longer-term fundamental ones. The latter appears to be content residing on the side-lines until either $1650.00 or $1750.00 an ounce, are convincingly broken.

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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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