Aussie jumps on solid Australian jobs; UK retail sales, Brexit news in focus
FX Today was offered some relief in Thursday’s Asian trading, as the US dollar resumed its corrective downside, having ignored upbeat remarks from the Fed Chair Powell. The USD/JPY pair also faded the bounce and fell back to the midpoint of the 113 handle amid a cautious tone prevalent across the Asian markets, as markets weigh in the Brexit deal optimism ahead of the clearance from the British parliament.
The Aussie was the top performer, benefitting from another stellar Australian jobs report while the Kiwi followed suit and reclaimed the 0.68 handle, with the advance limited by negative tone around oil prices. Meanwhile, gold prices on Comex caught a fresh bid wave and jumped above the 1210 level, despite a minor bounce in the US Treasury yields across the curve.
The Euro traded firmer near 1.1350 region, tracking the gains in the Cable on hopes that a Brexit deal will be soon clinched, especially after the UK Cabinet approved the Brexit draft agreement late-Wednesday.
Key Focus Ahead
Today’s EUR macro calendar remains eventful, with plenty of event risks against the back drop of the recent Brexit deal optimism. Markets brace for the UK retail sales data that will drop in at 0930 GMT and are likely to bounce to 0.2% on a monthly basis while staying flat annually. Also, of relevance remains the Eurozone trade balance figures due at 1000 GMT, followed by a slew of speeches by the ECB and BOE policymakers.
In the NA session, the US retail sales and Philly Fed manufacturing index will headline, due at 1330 GMT, among other minority reports while the Canadian ADP employment change report will be also published at 1330 GMT. At 1600 GMT, the EIA weekly fuel stocks data will be released, immediately followed by the Fed Chair Powell’s speech in Dallas while the New Zealand business PMI numbers at 2130 GMT will wrap up Thursday’s NY calendar.
GBP/USD Traders Range Bound with Bullish Bias near Previous Session High’s
The GBP/USD has found itself chained to the 1.3000 major handle as Brexit headlines continue to drag the Sterling up and down the charts. A tentative Brexit deal appears to be in the works, but plenty of legwork remains in the chute, with ratification required within all European constituencies, and the real challenge will come when UK Prime Minister Theresa May has to table and pass the Brexit deal, which remains largely under wraps, before the UK parliament, a true challenge for the PM’s closely-guarded Brexit proposals. Another reason for GBP’s stable price action above 1.30 handle could be result of broad based weakness surrounding US Greenback owing to US Treasury yield taking dovish tone.
Macro Data Unlikely to Have Any Impact Today as Analysts Await Brexit Draft to Pass through UK’s Parliament
A highly fluctuating headline surrounding Brexit proceedings kept the Pound in the lurch, and rumors are beginning to spread of a potential play by hard line Brexiteers to call a no-confidence vote in PM May this week, and derail Brexit negotiations once and for all. As of writing this article, the pair has taken to slow but steady uptrend price action near yesterday’s highs and is currently trading at 1.3014 up by 0.17% on the day. On release front today, UK’s calendar is scheduled to see Retail Sales due at 09:30 GMT, and the headline annualized figure is expected to hold steady at the previous reading of 3%.
Stock Market News
Dow Drops 200 Points as Financials, Tech Weigh
Wall Street closed lower on weakness in tech and financials, though signs of Brexit-deal progress lifted sentiment.
The Dow fell 0.81%, The S&P 500 fell 0.76% and the Nasdaq Composite fell 0.90%.
Apple (NASDAQ:AAPL), led the decline in the broader tech sector, falling 3% as concerns about its iPhone sales persisted in the wake of iPhone component suppliers warning on demand.
“Apple really has people questioning technology and the FAANGs. A lot of investors have their hopes pinned on Apple going up and that’s not happening,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.
Financial stocks also struggled after Democrat Maxine Waters, poised to become chair of the U.S. House banking committee, said regulations would not be eased any further on her watch, according to a CNBC report.
Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM) were both in the red.
“When Waters came up that had a profound impact on the markets and right about the time the S&P went negative,” said Forrest.
Corporate earnings, meanwhile, offered little reason for optimism as Macy’s (NYSE:M) fell 7% on concerns over whether the retailer can continue the pace of same-store sales growth following blowout third-quarter results, which topped analysts’ estimates on both the top and bottom lines.
Nikkei 225 Declines After S&P 500 Fell. ASX 200 Eyes October Low
- Nikkei 225 follows S&P 500 lower, Shanghai Composite rallies as most other little changed
- Australian Dollar rallied on jobs report, causing adverse knock-on effects on the US Dollar
- ASX 200 dominant downtrend still in play, October 26th low eyed if immediate support breaks
On Thursday, Japanese benchmark stocks indexes traded lower while Chinese ones headed higher in an otherwise relatively quiet session. The Nikkei 225 gapped lower, following the lackluster performance from the S&P 500 on Wall Street amidst Apple shares entering into bear market territory. Not surprisingly, information technology weighed on Japanese equities. Granted, consolidation ensued after the gap.
The Shanghai Composite rose about 0.70% as it headed for its highest close in one week. Meanwhile in Australia and South Korea, the ASX 200 and KOSPI traded little changed. Stocks showed little volatility to commentary from Fed Chair Jerome Powell which acknowledged that global growth is seeing a slowdown this year. He also added that the US economy is in a good pace that that it can grow faster.
Volatility could be found in the Australian Dollar which soared on a better-than-expected local jobs report. Australian front-end government bond yields rallied, signaling increased RBA rate hike bets. While this may drive the Aussie a little bit higher in the near-term, gains may not last down the road. The central bank remains very well patient before raising rates and is considerably less hawkish than the Fed.
Gains in AUD did weigh against the US Dollar though, but more progress needs to be done in AUD/USD to confirm a reversal of the dominant downtrend. S&P 500 futures are little changed heading into the European and US sessions, perhaps insinuating calm trading to come. But stocks and risk-sensitive FX remain vulnerable to stray negative Brexit progress and Italian budget headlines
ASX 200 TECHNICAL ANALYSIS
The ASX 200’s attempt to test the descending trend line from September was stopped by a horizontal resistance at 5,942. This area is a combination of the mid-October and November highs. Prices have since fallen through support at 5,795, stopping at 5,724 which is the April low. A descent through that will open the door to test the October 26th low at 5,624 which if taken out, may see the dominant downtrend resume.
Bitcoin Extends Losses After Hitting One-Year Low
Bitcoin and other major cryptocurrencies took a nosedive on Thursday morning in Asia, after a major sell-off in the previous session. Bitcoin dropped below a one-year low of $6,000, while some analysts attributed the plunge to spillover in U.S. stock markets.
Bitcoin slid 12.91% to $5,697 at 11:02PM ET (03:02 GMT) on the Bitifinex exchange.
Ethereum plummeted 16.73% to $180.05 on the Bitifinex exchange.
XRP fell 13.72% to $0.45324 on the Poloniex exchange, while Litecoin also lost 16.42% to $43.394 on the Bitifinex exchange.
The major sell-off starting from Wednesday pulled the total market capitalization of cryptocurrencies down below $200 billion, to $184 billion at the time of reporting, down more than 70% since the start of 2018, according to CoinMarketCap.com.
As bitcoin drops below $6,000, it is possible for stop-loss orders to go into effect. Investors are “trying to play the breakout,” crypto trader eToro’s Senior Market Analyst Mati Greenspan told CNBC.
“Another contributing factor is the sell-off in tech stocks, which could be having a spillover effect into crypto markets,” he said.
Other analysts did not jump to conclusions.
“What you are seeing…is a breakout on the downside. Sometimes when things happen, it takes a while for the true reason to become clear – an exchange trade or regulatory action,” Charlie Hayter, founder of industry website Cryptocompare, told Reuters.
Meanwhile, Malaysia’s government is calling for proper cryptocurrency regulations before introducing its Harapan Coin, the digital tokens that are expected to be the world’s first political fundraising platform.
“The anonymous nature of cryptocurrency may open us up to a number of issues and we need to wait for guidelines from Bank Negara Malaysia in regard [to] cryptocurrency,” Fahmi Fadzil, a parliament member, told The Star.
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