China's Ministry of Commerce (MOFCOM) official Mr. Wang crossed the wires last minutes, via Reuters, noting that China to further open market to other BRIC economies.
Reuters reporting a story carried by the state-owned China Securities Journal on Tuesday, citing that the Chinese State Information Center (SIC), an official think tank affiliated with the National Development and Reform Commission (NDRC), projects China’s annual growth rate of around 6.7% in the second half of 2017.
Meanwhile, it forecast full-year growth in the world's second largest economy of around 6.8%.
Reuters quoted a source familiar with the situation, noting that frustration and differences are mounting among leading foreign policy officials in Trump's administration, as they face policy and bureaucratic defeats and lack of independence to do their jobs.
A source noted: Tillerson was "very upset at not having autonomy, independence and control over his own department and the ability to do the job the way the job ... is traditionally done."
The source added: “The situation doesn't seem to be getting any better, and in some respects appears to be getting worse."
Gold’s two way price action and a flat closing at $1254.95 on Monday led to the formation of a classic ‘Doji candle’, which highlights indecision in the market place.
The safe haven yellow metal is under pressure this Tuesday morning. Prices currently hover around $1253. Chart experts say a bearish price action following Monday’s Doji candle would confirm the trend reversal.
Awaits Fed minutes
Fed minutes due for release tomorrow will show if the policymakers still see the drop in the inflation as transitory. The USD may strengthen and gold could feel the heat if the minutes ignore low inflation and talk about policy normalization.
Focus on yield curve
The data docket is light today, so the focus is almost entirely on the yield curve. The difference/spread between the 10-yr yield and the 2-yr yield currently stands at 0.80 basis points. A further narrowing of the spread would support gold and vice versa.
Gold Technical Levels
A break below $1252.50 (1-hr 50-MA) would open up downside towards $1246.02 (23.6% Fib R of $1204.70-$1258.79) and $1241.03 (June 21 low). On the other hand, breach of resistance at $1256.46 (daily high) would expose $1258.90 (June 23 high) and $1265.01 (May 18 high).
LedgerX LLC, a cryptocurrency trading platform operator, just received approval from the US Commodity Futures Trading Commission (CFTC) to operate as a federally-regulated exchange and clearing house for derivatives contracts settling in digital currencies, Bloomberg reports.
LedgerX CEO Paul Chou said in a telephone interview that the company plans to launch one to six month bitcoin-to-dollars options contracts in late September to early October.
Chou noted: “We want to keep it to a certain size in the beginning before we scale up over the next couple of months. We’re getting people that want to hedge and people that want exposure to a new asset class that they can add to their portfolio and help diversify, and get potential upside of potential digital currency.”
The People's Bank of China (PBOC) set the Yuan reference rate at 6.7485 vs. Monday's fix of 6.7410
The recovery in the AUD/JPY pair from the 4-day low of 87.65 is running out of steam in Asia, courtesy of the bearish 50-MA and 200-MA crossover on the 1-hour chart.
Stuck at 4-hr 50-MA
The cross has been rejected at the 4-hr 50-MA level of 88.21 in Asia, but remains above 88.00 handle. BOJ minutes called for maintaining the easing bias given the inflation remains well below the 2% inflation target. The dovish tone is helping AUD/JPY maintain the bid tone despite rejection at the 4-hr 50-MA level and the bearish 1-hr 50-MA and 200-MA crossover.
The data docket is thin in Asia. Hence, the focus remains on the broader market sentiment, which as of now remains in favor of the risk assets.
AUD/JPY Technical Levels
A break above 88.21 (4-hr 50-MA) would open up upside towards 88.42 (5-DMA). An end of the day close above the same would signal the technical correction is over and expose the recent high of 89.32 levels. On the downside, breach of support at 88.00 (zero levels) could yield a sell-off to 87.65 (previous day’s low) and 87.54 (23.6% Fib R of 81.78-89.32).
Analysts at Nomura's USD/CNY projection for today's fix ...
"Our model1 projects the fix to be 156 pips higher than the previous fix (6.7566 from 6.7410) and 61 pips higher than the previous official spot USD/CNY close of 6.7505.
The basket implied change is 71 pips higher than the previous official spot USD/CNY close (6.7576 from 6.7505)."
Goldman Sachs said on Monday, “Higher vehicle efficiency and electric cars penetration, higher fuel prices, and lower economic growth may lead to a global oil demand peak as soon as in 2024”.
In our extreme case, we project peak oil demand in 2024
Emerging markets economic growth, which will be led by India, may push the reaching of peak demand to until 2030
While other oil products will raise their shares in the global oil demand mix, the share of gasoline and diesel is expected to stagnate until 2030
Currently, USD/JPY is trading at 111.26, up 0.15% on the day, having posted a daily high at 111.34 and low at 111.07.
USD/JPY is toying with a double top in the Tokyo open, while Nikkei follows suit of the NASDAQ's performance overnight, although the Dow Jones Industrial Average and the S&P 500 indexes were both finishing in the red.
Eyes are on earnings this week while the FX space will be paying most attention to GDP Q2 from the US and the FOMC meeting mid week. However, the Federal Reserve meeting is not “live”. In respect to the US GDP outlook, this stands at 2.0% vs 1.9% previous for 2017 Q2 according to the NY Fed with their US GDP for Q3 outlook standing at 2.0% vs 1.8% previous; The market is looking for 2.6% annualised.
BOJ minutes: Need to keep policy easy as 2% inflation target still distant
With respect to the BoJ, analysts at Westpac explained that a lower than expected level of BoJ bids for JGB suggests a less aggressive approach to ensuring a lower bias to the BoJ’s yield curve management after pushing out their inflation targets. "Further declines in stock markets could trigger risk reduction and result in JPY gaining a safe-haven boost," noted the analysts.
USDJPY: Buy dips towards 110.65/75 (SL sub 110.50)
Valeria Bednarik, chief analyst at FXStreet explained that the pair settled above a huge Fibonacci support at 110.90. "In the daily chart, the price remains below its 100 DMA, while technical indicators maintain their bearish slope within a negative territory. In the 4 hours chart, technical indicators have bounced from oversold readings, but remain within negative territory while the price remains well below its 100 and 200 SMAs, limiting chances of a steeper advance."
Oil prices ended on a higher note on Monday after Saudi Arabia pledged to lower oil exports, while Nigerians agreed to limit their production.
Despite the positive developments, the 1-hr 200-MA hurdle is proving out to be a tough nut to crack. Multiple attempts to cut through the moving average have in the overnight trade. Currently, prices are having another go at the 1-hr 200-MA seen at $48.67.
At the meeting of OPEC and non-OPEC producers in St. Petersburg on Monday, Saudi announced that it would be capping its exports to 6.6 million bpd, a decline of almost a million bpd from the country’s export level last year. Furthermore, Nigeria agreed to cap its output at 1.8 million bpd, which means an increase of about 100,000 bpd from its current level.
It is widely believed that these developments coupled with the possibility of disruptions to Venezuela’s exports to the US could lead to higher oil prices. However, as mentioned above, the 1-hr 200-MA still stands intact as a strong resistance.
Brent Oil Technicals
The 1-hr chart shows a bearish crossover between the 50-MA and 200-MA. A break above $48.74 (overnight high) could yield a rally to $49.17 (July 20 low on 1-hr chart). On the downside, failure to hold above $48.57 (1-hr 50-MA) would open up downside towards $47.67 (July 24 low).
The minutes of the June Bank of Japan (BOJ) policy meeting released this Tuesday morning showed-
The NZD eased off its recent highs with a quiet start to the week.
"The RBNZ speech tomorrow will be examined for the extent the Bank is, or is not, looking through recent currency strength.
Locally, broad-based strength across New Zealand’s commodity prices could be viewed as the offset for exporters in these sectors."
"Dairy prices, particularly wholemilk powder, edging back up could provide further support. But equally, a weak global inflationary pulse and elevated NZD keeps downward pressure on tradable inflation.
Offshore developments remain critical too, with the US FOMC and politics continuing to drive USD direction."
"Australia’s Q2 CPI tomorrow will also be important for NZDAUD and NZDUSD direction too."
Currently, NZD/USD is trading at 0.7436, down -0.04% on the day, having posted a daily high at 0.7441 and low at 0.7431.
NZD/USD is making a fresh high out of the consolidation range of overnight in lightly traded markets. There are early signs of a possible top ahead of 0.7485 (Sep 16 peak) explained analysts at Westpac who hold a neutral outlook for today.
US: FOMC appears ready to start reducing the balance sheet - Nomura
NZD/USD 1-3 month:
On a wider outlook, the analysts explained that the Fed’s tightening cycle plus US fiscal expansion should eventually reassert upside pressure on US interest rates and the US dollar, pushing NZD/USD to 0.6800 by year end. US factors should outweigh local factors which are mostly supportive.
0.7460 was Friday's 10-month high while 0.7485 (the September high) remains the resistance thereafter. Supports are 0,7420, 0.7386, 0.7280, (11th July high), 0.7205/06 June 22/21 lows; 0.7186 June 15 low; 0.7150 June 5 high; 0.7127 June 6 low. On the wide, on a break below 0.7080/00 opens 0.6970.
Currently, AUD/USD is trading at 0.7923, down -0.01% on the day, having posted a daily high at 0.7927 and low at 0.7921.
AUD/USD is consolidated after the overnight sessions where not a great deal of business went on in the markets, awaiting the week's schedule to fall in later during the forthcoming sessions. The Aussie will be in for a potential ride in the CPI data tomorrow, but for today, analysts at Westpac suggest that further consolidation between 0.7850 and 0.8000 is to be expected.
US: FOMC appears ready to start reducing the balance sheet - Nomura
AUD/USD 1-3 month:
"Much of AUD/USD's gains have been driven by broad US dollar weakness. But there has also been a partial recovery in Australia's key commodity prices, after very steep declines in April and May," noted the analysts, adding, "However, beyond multi-week gains, a firmly on hold RBA is likely to keep a lid on AUD/USD, easing to 0.74 by year-end."
AUD/USD is poised to encounter its 200-week ma, analysts at Commerzbank argued. "Last week we saw the market halt just ahead of the 0.8011 200 week ma and very near term there is a 13 count on the daily chart and a TD perfected set up on the weekly chart and we suspect it has started to correct lower. Currently, the corrective zone is indicated to be circa 0.7820-0.7750. While above the uptrend at 0.7661 we will assume it is capable of further gains. Above 0.8011 targets the 0.8162/66 May 2015 peak and 50 % retracement, " the analysts explained.
Analysts at Westpac's market wrap...
"Global market sentiment: US interest rates rose slightly while the USD consolidated near a one-year low. There was little news to drive markets.
Interest rates: US 10yr treasury yields rose from 2.23% to 2.26%, and 2yr yields rose from 1.34% to 1.37%. Fed fund futures yields priced the chance of a December rate hike at around 45%.
Currencies: The US dollar index closed 0.1% higher on the day, after making a 13-month low. EUR slipped from 1.1670 to 1.1626. USD/JPY made a one-month low at 110.62 before retracing the day’s losses. AUD initially rose to 0.7968 before retracing to 0.7913. NZD ranged between 0.7420 and 0.7450. AUD/NZD initially rose from 1.0660 to 1.0704 before retracing.
Existing home sales fell 1.8% in June (vs -0.9% expected), sales moderating in Q2 following an above-average winter. Still, they are on track for a 4% rise over 2017, similar to 2016’s 3.9%. The median sales price rose from $252,500 to $263,800, for a 6.5% annual gain. US manufacturing PMI (Markit) rose from 52.0 to 53.2 (vs 52.3 expected) – the 14th consecutive month of expansion."
Analysts at Nomura reviewed today's data from the US in the existing home sales.
"Existing home sales fell 1.8% m-o-m to an annual rate of 5.52mn units in June, below consensus (Nomura: -1.1% to 5.56mn, Consensus: -0.9% to 5.57mn), which is a slight slowdown from the 5.62mn pace in May. Single family home sales fell 2.0% while multifamily home sales were unchanged. While the fundamentals for underlying demand remained firm (such as job creation and income gains), the supply of previously-owned homes remained lean, possibly weighing down contract closings in June. Homes on the market for sale fell 7.1% y-o-y, with the months’ supply indicator at 4.3 in June, a slight improvement from 4.2 months in May, but likely a result of slower sales in June. With low levels of inventories, the median price of previously owned homes reached USD 263.8k, up 6.5% y-o-y, highlighting a recent uptrend in home prices. Without a subsequent pick-up in supply, house prices are likely to continue to outpace wage gains over the medium term, exacerbating affordability for home buyers.
GDP tracking update: Existing home sales data today, while weaker than expected, left our Q2 GDP tracking estimate unchanged at 2.5% q-o-q saar. Existing home sales fell more than expected in June, suggesting that brokerage fees and commissions, a component of residential investment, may have been slightly weaker than our estimate. However, after rounding, our Q2 GDP tracking estimate remains unchanged. Note that the first estimate of Q2 GDP growth from the BEA will be released on Friday."
Data source: FX Street
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