OANDA Trading : Asia EOD , very busy in currency markets | Daily Market Commentary with Stephen Innes
Busy on the currency desk
Hectic day on both the EUR and CNH as the sell all USD theme continued to resonate but today’s extension is likely in anticipation of more Fed speak which will remain the main focuses in G-10 traders. Fed Chair Powell, VP Clarida and members Bullard, Evans, Kashkari, and Barkin all on the wires. The dollar is in a precarious spot as there is no more policy normalisation to anchor to, but instead, we could expect yet another chorus of dovish Fedspeak to fill the airwaves.
With the market is leaning lower USD so no need to fight this one. The softer Fed tone and with the markets shifting more positive on US-China trade talks all of which suggest commodity currencies could be in for a significant bounce.
Even the Euro, which has its own economic and political woes. But it’s a very heavy USD backdrop as evidenced by the break of 6.79 USDCNH.
Let’s face it, the Feds have told us they’re willing to sit on their hands for the first half of the year which suggests the USD has to give way and we could see the EURUSD extend to 1.1625-30 (200-day MA) and USDCNH fall to 6.75 in quick order.
Bonds Bonds Bonds !! MYR bonds are in demand as the currency broker the key 4.10 as traders were scurrying for MYR bonds to get Ringgit exposure. In the absence of an NDF market, investors access MYR bonds to gain currency exposure. Indeed, the stars are aligned for the Ringgit with risk on, a dovish Fed a weaker USD, lower USD bond yields and rising oil prices all suggesting the local unit could extend gains. to the next critical support level around 4.0750
Gold continues to thrive in this environment as the dollar looks like its doing little more than holding on a wing and a prayer. And the gold market seems poised to take another run at the critical $1300.
On the Fed policy front, everything is lining up for a weaker USD, and gold prices break out above $ 1,300, but you must want it!
After a scintillating rally, oil markets are taking a bit of time out but remain well supported by OPEC cuts, US-China trade talks a dovish fed and the expectation of more Pboc stimulus after the soft factor gate inflation as the markets continue to lean against both the Pboc and Federal Reserve policy backstops.
Investors hit the pause button today but have turned a tad defensive after getting no joy from the US-China trade discussion which on the surface remains a work in progress. But this outcome if very much in line with broader expectations given this was a preliminary mid-level US and Chinese trade representatives affair possibly setting up for a more significant announcement in Davos when President Trump takes the grand stage.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Stephen Innes is the Head of Trading, at OANDA Asia Pacific.
Innes has a deep-seated knowledge of the G10 and Asian currencies and is regularly called upon by leading TV, radio and print publications to offer his informed views on the financial markets. He offers specific expertise in trading spot and forward FX, currency and interest rate futures, money market derivatives and precious metals.
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