Tue, Dec 01, 2020 @ 23:47 GMT
Home Action Insight Market Overview Yen Accelerates Lower on Rebound in Yields, Strength in US Stocks

Yen Accelerates Lower on Rebound in Yields, Strength in US Stocks

Yen is trading as the worst performing today so far, as pressured by surge in US treasury yields. In particular, 10-year yield is above 0.68 handle in pre-markets and could even challenge 0.7% today. US futures also point to higher open with S&P 500 could finally challenge record high. New Zealand Dollar remains one of the weakest after RBNZ’s QE expansion. On the other hand, Swiss Franc is the strongest one, followed by Euro. Dollar is mixed, shrugging off better than expected CPI, losing some momentum as gold rebounds.

Technically, the steep correction in Gold wasn’t enough to push Dollar through near term resistance. With the loss of momentum, Dollar could turn back focus to near term support, including 1.1916 resistance in EUR/USD. In particular, EUR/JPY followed USD/JPY in rally resumption. EUR/JPY took out 125.58 resistance and should now extend the rise from 114.42 to 100% projection of 114.42 to 124.43 from 119.31 at 129.32, with some upside accelerations.

In Europe, currently, FTSE is up 1.56%. DAX is up 0.24%. CAC is up 0.59%. Germany 10-year yield is up 0.036 at -0.441. Earlier in Asia, Nikkei rose 0.41%. Hong Kong HSI rose 1.42%. China Shanghai SSE dropped -0.63%. Singapore Strait Times rose 0.75%. Japan 10-yaer JGB yield rose 0.0100 to 0.044.

US CPI picked up to 1.0% yoy, core up to 1.6% yoy

US headline CPI rose 0.6% mom in July, above expectation of 0.4% mom. CPI core rose 0.6% mom, also above expectation of 0.2% mom. Annually, CPI accelerated back to 1.0% yoy, up from 0.6% yoy, beat expectation of 0.8% yoy. CPI core picked up to 1.6% yoy, up from 1.2% yoy, also beat expectation of 1.6% yoy.

Eurozone industrial production rose 9.1% in June

Eurozone industrial production rose 9.1% mom in June, below expectation of 10.0% mom. Annually, production dropped -12.3% yoy. Production of durable consumer goods rose by 20.2%, capital goods by 14.2%, intermediate goods by 6.7%, non-durable consumer goods by 4.8% and energy by 2.6%.

EU industrial production rose 9.1% mom, dropped – 11.6% yoy. The highest increases were registered in Slovakia (+21.7%), Hungary (+17.1%) and Romania (+16.3%). Decreases were observed in Belgium (-1.4%) and Finland (-0.8%).

UK GDP rose 8.7% mom in June, down -20.4% qoq in Q2, -17.2% below Feb’s level

UK GDP grew 8.7% mom in June, better than expectation of 8.0% mom, and a strong improvement from May’s 2.4% mom. For the quarter, Q2 GDP, however, still contracted -20.4% qoq, slightly below expectation of -20.2% qoq. That’s also notable deterioration from Q1’s -2.2% qoq. Overall, GDP remains -17.2% below levels seen back in February, before the full impact of the coronavirus.

In June, services grew 7.7% mom. Production rose 9.3% mom. Manufacturing rose 11.0% mom. Construction rose 23.5% mom. Agriculture rose 2.7% mom. But all sectors were down in the rolling three-month to April-to June, with services down -19.9% 3mo3m, production down -16.9% 3mo3m, manufacturing down -20.2% 3mo3m, construction down -35.0% 3mo3m, and agriculture down -4.8% 3mo3m.

Also from UK, goods trade deficit widened to GBP -5.1B in June, larger than expectation of GBP -4.5B.

RBNZ expands QE, prepare for negative rates, NZD/USD tumbles

RBNZ kept the Official Cash Rate unchanged at 0.25% today, but expanded the Large Scale Asset Purchase program to NZD 100B, up from NZD 60B. Eligible assets for the program remain unchanged. RBNZ also said a “package of additional monetary instruments must remain in active preparation”, including negative interest rates and purchases of foreign assets. Full statement here.

New Zealand delay dissolution of parliament, Auckland back in lockdown

New Zealand Prime Minister Jacinda Ardern put Auckland back into stage 3 lockdown, for three days as a “precautionary approach”. That came after the country recorded first new local coronavirus cases in 102 days. More importantly, the mystery cases, which were all diagnosed in one family, was spread from an unknown source.

Besides, Arden also decided to postpone the dissolution of parliament, due on Wednesday, ahead of an election just weeks away. The electoral commission was working through the implications of the coronavirus outbreak, and a decision would be on on the elections which are scheduled for September 19.

Australia consumer confidence plunged back near April low

Australia Westpac consumer confidence dropped -9.5% to 79.5 in August, down from 87.9. Westpac said “the scale of the fall comes as a major surprise” and it’s now back near the “extreme low” of 75.6 made in April. Nevertheless, that could prove to be a “significant overreaction” to the return to lockdown.

Westpac expects RBA to maintain current policies in the upcoming September 1 meeting. The next major event would be the Commonwealth Budget in October 6. As the consumer sentiment survey highlights the uncertainties around the current outlook, Westpac expects the government commit to providing “generous ongoing support the the economy”.

Also from Australia, wage price index rose 0.2% qoq in Q2, below expectation of 0.3% qoq.

EUR/JPY Mid-Day Outlook

Daily Pivots: (S1) 124.42; (P) 124.96; (R1) 125.57; More….

EUR/JPY’s strong break of 125.58 indicates resumption of whole rise from 114.42. Intraday bias is back on the upside. Next target is 100% projection of 114.42 to 124.43 from 119.31 at 129.32. On the downside, break of 124.31 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, whole down trend from 137.49 (2018 high) could have completed at 114.42 already. Rise from 114.42 would target 61.8% retracement of 137.49 to 114.42 at 128.67 next. Sustained break there will pave the way to 137.49 (2018 high). This will remain the preferred case for now, as long as 55 day EMA (now at 121.81) holds. However, sustained break of 55 day EMA will revive medium term bearishness for another low below 114.42 at a later stage.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:50 JPY Money Supply M2+CD Y/Y Jul 7.90% 7.60% 7.20% 7.30%
00:30 AUD Westpac Consumer Confidence Aug -9.50% -6.10%
01:30 AUD Wage Price Index Q/Q Q2 0.20% 0.30% 0.50%
02:00 NZD RBNZ Rate Decision 0.25% 0.25% 0.25%
03:00 NZD RBNZ Press Conference
06:00 JPY Machine Tool Orders Y/Y Jul P -31.10% -32.10%
06:00 GBP GDP M/M Jun 8.70% 8.00% 1.80% 2.40%
06:00 GBP GDP Q/Q Q2 P -20.40% -20.20% -2.20%
06:00 GBP Industrial Production M/M Jun 9.30% 9.40% 6.00% 6.20%
06:00 GBP Industrial Production Y/Y Jun -12.50% -13.10% -20.00%
06:00 GBP Manufacturing Production M/M Jun 11.00% 10.00% 8.40% 8.30%
06:00 GBP Manufacturing Production Y/Y Jun -14.60% -15.00% -22.80%
06:00 GBP Index of Services 3M/3M Jun -19.90% -19.20% -18.90% -18.50%
06:00 GBP Goods Trade Balance (GBP) Jun -5.1B -4.5B -2.8B
09:00 EUR Eurozone Industrial Production M/M Jun 9.10% 10.00% 12.40% 12.30%
12:30 USD CPI M/M Jul 0.60% 0.40% 0.60%
12:30 USD CPI Y/Y Jul 1.00% 0.80% 0.60%
12:30 USD CPI Core M/M Jul 0.60% 0.20% 0.20%
12:30 USD CPI Core Y/Y Jul 1.60% 1.20% 1.20%
13:00 GBP NIESR GDP Estimate (3M) Jul -21.20%
14:30 USD Crude Oil Inventories -3.4M -7.4M

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