FX News Today
Asian Market Wrap: 10-year Treasury yields held slightly below the 3% mark during the Asian session, 10-year JGB yields fell -1.0 bp at 0.103%. BoJ’s verbal intervention and unscheduled offer to buy bonds yesterday seems to have capped investor’s appetite to test the new BoJ tolerance on the 10-year yield for now. Meanwhile long yields in China moved higher as the Yuan continues to slide. Stocks traded mixed across Asia. The Nikkei is up 0.08%, but the Topix fell -0.45% and is heading for its first weekly loss in a while, after disappointing earnings reports. Despite this, Japan overtook China as the world’s second largest stock market amid a slump in the Shanghai Composite Index this week. The index lost a further -0.05% so far today, the CSI 300 is down -0.585, as a weaker than expected Caixin/Markit Services PMI added to ongoing trade jitters. The ASX 200 lost 0.11% and US futures are also down.
FX Action: USDJPY has lifted to the upper 111.0s, reflecting a broadly softer Yen today as global stock markets stabilize. The 10-year JGB yield also fell to 0.103%, aided lower by scheduled BoJ purchases today, with the central bank making clear through its actions over the last day that it won’t be a one-way street to its newly installed 0.2% upper yield limit. Yesterday, BoJ member Amamiya reminded markets, that the central bank will buy JGBs if yields rise rapidly, and that “powerful easing” remains appropriate as it will take time for the 2% inflation target to be achieved. Taking a step or two back, USDJPY has been trading with little overall direction since early 2017, turning about a 10-big figure range in drawn-out oscillations, pulled lower during risk-off phases in global markets and pulled higher when markets are more focused on underlying fundamentals. The range over this period has been 104.63 to 115.50, and there doesn’t look much, at the moment, to suggest there will be a shift out of this trend. Near-to support is at 111.39 – 111.40.
Charts of the Day
Main Macro Events Today
- UK Service PMI – Expectations – It is projected at 54.9 after 55.1 in the month prior.
- EU Service PMI – Expectations – It is expected at 54.4, which should leave the composite reading at 54.3, unchanged from the preliminary reading and down from 54.9 in June.
- Non-Farm Payrolls – Expectations – The July employment report holds its usual top spot as the indicator of the month. We forecast a 190k increase in jobs as manufacturing remained healthy.
- Earnings and Unemployment Rate – Expectations – The unemployment rate is expected to dip back to 3.9%, while earnings should rise 0.3%. Nearly all labor market indicators have presented very tight conditions and extreme difficulty in finding qualified workers, which resulted in a huge jump in the labor force in June.
- Canada Trade – Expectations – is expected to narrow to -C$2.3 bln in June from -C$2.8 bln in May. Exports are seen growing 1.5% m/m in June after the 0.1% dip in May. Imports are projected to rise 0.5% in June after the 1.7% bounce in May that followed the 2.8% drop in April.
Support and Resistance levels
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Andria Pichidi
Market Analyst
HotForex
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