CHINESE YUAN, USD/CNH, STIMULUS, UK, OIL, TECHNICAL OUTLOOK – TALKING POINTS
- The Chinese Yuan gained against the Dollar overnight amid risk-on market
- Iron ore prices rose after news circulated that China may boost stimulus
- USD/CNH is trading near triangle support after dropping below 20-day SMA
FRIDAY’S ASIA-PACIFIC OUTLOOK
Asia Pacific markets look set to open higher following the third day of gains on Wall Street, with the S&P 500 closing 1.49% higher. A possible global recession remains a concern for investors, but markets trimmed bets on Federal Reserve rate hike bets, now seen topping out early next year, according to overnight index swaps. Still, traders may be cautious moving into the weekend ahead of tonight’s US non-farm payrolls report. Analysts see the June headline figure crossing the wires at +268k, according to a Bloomberg survey.
The Australian Dollar tracked higher against the US Dollar, helped by a Dollar that weakened amid the risk-on market sentiment. A rise in iron ore prices may provide another tailwind for AUD. China may consider new stimulus measures, according to sources cited by Bloomberg news. Beijing may permit local governments to conduct special bond sales through year-end to finance infrastructure projects. The move would likely need congressional approval. The Yuan has strengthened against the Greenback since the news hit.
In the United Kingdom, Prime Minister Boris Johnson announced his resignation following a wave of resignations from his government. A successor is being sought out by UK Tories, who aim to have a new pick by September. The British Pound made headway against the US Dollar and Euro after the announcement as the uncertainty around his tenure cleared. EUR/GBP fell to the lowest level since May 23.
Crude oil prices rebounded despite a large build in US stockpiles. The Energy Information Administration (EIA) reported a 8.24 million barrel increase in crude oil stocks for the week ending July 01. That was well above the 1 million barrel draw that analysts expected. The news out of China may be providing support for oil prices. Altogether, APAC stocks and currencies may extend their overnight gains, but traders may remain cautious given the upcoming NFP data.
NOTABLE EVENTS FOR JULY 8:
- Japan – Bank Lending (JUN)
- Indonesia – Consumer Confidence (JUN)
- Japan – Eco Watchers survey (JUN)
Click here to view today’s full economic calendar
Trading within a Symmetrical Triangle pattern, USD/CNH may see a directional break in the near term as prices near the triangle’s apex. A slightly bullish bias is lent to the cross, given its preceding uptrend, but prices are falling near support. A break below support could bring the rising 100-day SMA into focus. Lately, prices have traded around the 20-day Simple Moving Average.
USD/CNH 8-HOUR CHART
Chart created with TradingView