Top News and Analysis

EUR/USD: Dollar softens as Treasury yields slide

Dollar falls four out of five days to euro as 10-year Treasury drops 14.8bps to 4.655% Atlanta Fed GDPNow estimate for Q3 rose from 4.9% to 5.1% Treasury 3-year auction sees lowest bit-to-cover since February; 2.50 v 2.75 prior Fed speak remains dovish; Waller refrains from commenting on near-term interest rate outlook The dollar is declining and US stocks are rallying after a steady dose of dovish Fed speak has traders convinced rate hikes are over. Also providing a boost to sentiment is the r

10-10-2023 15:22 GMT by Edward Moya

Dollar dips after SLOOS signals tightening lending standards across all categories

4.8% of Large & Mid-market firms in July say conditions tightened considerably, up from 3.2% in April. Commercial and Industrial loans for medium and large firms saw an increase in tightening terms (50.8% vs 46% prior) Fed rate cut odds for the December 13th meeting remained around 17.5% The Fed July Senior Loan Officer Survey (SLOOS) on Bank Lending Practices highlighted a that tightening lending standards occurred across all categories. The impact from the Fed's tightening cycle is clearly i

31-07-2023 14:33 GMT by Edward Moya

A reversal of fortunes for US banks and technology stocks

Prior underperforming US banks rallied last week where the SPDR Banks ETF rose by 6.76%, its best weekly gain seen in 14 months. The high growth technology concentrated Nasdaq 100, the top year-to-date performer, underperformed last week, dragged down by Tesla and Netflix ex-post earnings releases. Extreme positioning, and complacency bias in Nasdaq 100 increase the risk of a medium-term bearish reversal in technology stocks. In the past two weeks, we have seen the latest Q2 earnings releases o

24-07-2023 00:45 GMT by Kelvin Wong

China’s proxy stock market rallied, hawkish pause for RBA

US-China geopolitical tension remains on heat after the latest China exports curb on key metals for semiconductor chip production. China’s proxy stock market; Hang Seng benchmark stock indices rallied to a 5-day high. RBA left its policy cash rate unchanged at 4.10%, a pause after two consecutive interest rate hikes but hinted in its monetary policy statement is tilted towards a hawkish pause. Actions speak louder than words in geopolitics In the past two weeks, we have witnessed key officials

04-07-2023 02:00 GMT by Kelvin Wong

AUD/USD Technical: Positive momentum ahead of RBA

AUD/USD rallied by 97 pips from last Thursday, 29 June low of 0.6593. Staged a minor bullish breakout ahead of RBA’s monetary policy decision today. Watch 0.6630 key short-term support to maintain the current bullish tone. Since its 0.6593 minor low printed last Thursday, 29 June, the AUD/USD has managed to stage a rebound of 97 pips to print an intraday high of 0.6692 yesterday, 3 July ahead of Australia central bank, RBA’s monetary policy decision out later today at 0430 GMT. The interest ra

03-07-2023 21:33 GMT by Kelvin Wong

USD/JPY Technical: 142.25 resistance met with bullish exhaustion

The rally of USD/JPY has reached 142.25/142.50 key medium-term resistance ex-post BoJ monetary policy decision last Friday. Latest Commitments of Traders report on JPY futures on net large speculators’ open bearish positioning has reached close to a 3-year extreme. The next key related event will be the release of Japan’s nationwide inflation data for May on this Friday, 23 June. This is a follow-up analysis from our earlier publication dated 15 June 2023, “USD/JPY Technical: Bullish breakout f

20-06-2023 01:19 GMT by Kelvin Wong

China’s deflationary spiral bumps up FX risk aversion

China’s NBS Manufacturing and Non-Manufacturing PMIs for May have increased the risk of a deflationary spiral in China. A weaker Chinese yuan may be required to counter and smooth the adverse effects of the deflationary spiral at least in the short-term. Risk aversion has resurfaced in the FX market via weakness seen in the G-10 JPY crosses. In stark contrast to the recent findings of China’s manufacturing sector survey done by China Beige Book, a US-based data provider that has indicated a reb

31-05-2023 02:08 GMT by Kelvin Wong

Tokyo core-core CPI continues to accelerate with USD/JPY now below key 141.00

Tokyo core-core CPI (excluding fresh food & energy) accelerated to a 31-year high BoJ’s latest guidance from Governor Ueda is no longer making wage growth as a main priority, raising the possibility of a monetary policy normalization in H2 2023. The 5-month rally of USD/JPY is now coming close to key short-term resistance at 141.00. This week’s latest release of key leading economic data out of Japan has indicated signs of sustained inflationary growth

26-05-2023 04:14 GMT by Kelvin Wong

NZD/USD: RBNZ less hawkish tilt reinforces USD bulls

RBNZ hiked its official cash rate as expected by 25 bps to 5.50% It is the first time RB NZ’s monetary policy-setting committee went to a vote today. Split vote of 5 to 2 has indicated a high probability 5.50% is the terminal rate after today’s hike. USD bulls are playing catch-up against prior NZD’s outperformance. The New Zealand dollar, NZD is the weakest currency against the US dollar in today’s Asian session as it tumbled by -1.10% at this time of the writing reinforced by post-RBNZ, the

24-05-2023 01:22 GMT by Kelvin Wong

DJIA Technical: Capped below the 20-day moving average

Since its 1 December 2022 high, the Dow Jones Industrial Average has evolved into a major “Expanding Wedge” range configuration. In the short-term, no clear signs of upside momentum as its price actions are being capped below the 20-day moving average. Key short-term resistance to watch will be at 33,580. The Dow Jones Industrial Average (DJIA) is one of the underperforming major US stock indices together with the Russell 2000 so far with a recent weekly loss of -1.11% for the week of 8 May and

15-05-2023 06:26 GMT by Kelvin Wong

SP 500: Ignoring US debt ceiling standoff risk

US debt ceiling limit of US$31.4 trillion may be reached on 1 June. Prior movement of implied bond market volatility during the 2011 US debt ceiling standoff provided a leading indicator for the uptick in US stock market volatility. Given the current loop-sided performance among the major US benchmark stock indices, the downside adjustment to offset the relatively low level of the VIX may be significant. The US debt ceiling limit is now getting closer to hitting the US$31.4 trillion cap that wa

15-05-2023 02:51 GMT by Kelvin Wong

Nasdaq 100: Bulls may be too optimistic on US CPI

Nasdaq 100 continued to outperform against S&P 500, Dow Jones Industrial Average & Russell 2000. The K-shaped performance has widened between Nasdaq 100 & the laggards. US sticky-price inflation for April remains elevated with a risk of a further increase in global food prices. The US stock market on the aggregate rejoiced yesterday after the release of the US inflation data for April and the S&P 500 erased its earlier losses inflicted in the first half of this week. The headline US consumer p

11-05-2023 02:22 GMT by Kelvin Wong

Nikkei 225: Bulls are showing signs of resilience

Japanese stock market has continued to outperform against the rest of the world. Positive earnings momentum from Japanese corporations is providing support. BoJ Governor Ueda has sounded optimistic about the current upward inflationary trend in Japan. The Japanese stock market has continued to show resilience despite the current heightened risk of global stagflation and rising geopolitical tensions.

09-05-2023 02:56 GMT by Kelvin Wong

JPY bearish positioning is getting overstretched

Better than expected US non-farm payrolls for April have failed to ignite US dollar bulls. Two outliers; the safe haven currencies, CHF and JPY underperformed against the US dollar due to the resurgence of risk-on behaviour in the US stock market. JPY future’s bearish positioning has highlighted a risk of a short-term revival of JPY’s strength. Last Friday, the better-than-expected US official non-farm payrolls data (labour market) for April failed to trigger a meaningful rally in the US dollar

08-05-2023 01:49 GMT by Kelvin Wong

USD/CNH: Animal spirits are in control of China’s equities

China equities & its proxies are resilient against a lacklustre macro environment. Sentiment-driven animal spirits are playing a key role in the recent rebound of China equities. USD/CNH (part of the sentiment-driven factor) has flashed exhaustion conditions after failing to break above the key 200-day moving average. The past four days of performances seen in the China stock market and its proxies seem to be more driven by animal spirits rather than fundamentals. Let’s discuss a bit about th

05-05-2023 02:00 GMT by Kelvin Wong

Asian stock markets rejoiced post-FOMC

US stock indices spooked by Fed Chair Powell’s “hawkish” comments. USD sold off while safe haven currencies, JPY & CHF in demand. Asian stock market outperformed while Hong Kong indices rebounded from the key 200-day moving average. No surprise from the US central bank, Federal Reserve’s policy meeting outcome yesterday where the Fed hiked its policy Fed funds rate by 25 basis points as expected, its 10th hike in this current tightening cycle to a target range of 5% to 5.25%. Most importantly,

04-05-2023 02:01 GMT by Kelvin Wong

USD/JPY: Will BoJ throw in a shock surprise?

JGB futures implied volatility has ticked lower. Tokyo core inflationary data for April has continued to accelerate, above BoJ’s target for 11 consecutive months. USD/JPY is testing key short-term range support at 133.20.

27-04-2023 23:52 GMT by Kelvin Wong

JPY carry trade: Downside pressure mounts as global demand faces headwinds

Commodities and growth proxies JPY crosses are leading the decline in G10 JPY carry trade basket. A widening of the US high-yield corporate bonds credit spread may spark a higher volatile movement in the JPY crosses. Key US earnings releases from Visa, Microsoft, and Alphabet are indicating slower global demand spending despite expectations beat. FX volatility may start to increase as G10 JPY crosses have shaped significant reversal movements Fig 1: G10 JPY crosses 1-month rolling performanc

26-04-2023 01:11 GMT by Kelvin Wong

US Russell 2000: At risk of downturn from credit crunch

US banking systemic risk has toned down in the last two weeks. US corporate credit crunch risk is still a live event. A widening of the US high-yield corporate bonds credit spread may trigger a downturn in US small-cap equities (Russell 2000). A month has passed since the mini risk-off episode that shook the international financial markets triggered by the turmoil seen in the US regional banks due to the mismanagement of duration risk on their respective balance sheets. So far, any outburst of

25-04-2023 01:34 GMT by Kelvin Wong

Lack of further liquidity and investors’ positioning put a dent in China’s stock market optimism

Cyclical sectors have underperformed, and Real Estate is the worst. No clear signs to indicate the resurgence of a major bearish trend. China A50 is at risk of further downside pressure to retest key support at 12,300. China’s stock market has started to show signs of fatigue after a magnificent three-month rally of 22% from the October 2022 low to January 2023 high as seen on its benchmark CSI 300 Index. Since 18 April 2023, it has declined by close to -4% and underperformed a basket of develo

24-04-2023 01:55 GMT by Kelvin Wong