· The dollar held the upper hand against its rivals on Wednesday, particularly versus traditional safe-haven currencies, on rising hopes for a U.S.-China trade deal and a string of solid U.S. economic data.
The dollar index against major currencies was little changed at 97.936 in early Asian trade after rising 0.37% the previous day.
Against the yen, the dollar traded at 109.08 yen, down slightly on the day but still not far from its October high of 109.285.
The euro stood at $1.1073, having dropped 0.49% on Tuesday and was not far from a near three-week low of $1.10635 hit in U.S. trade on Tuesday.
· USD/JPY: Bears attack 109.00 amid souring risk sentiment
With risk-off trades back in vogue amid potential risks to the US-China Phase One trade deal, the demand for the safe-haven Yen is on the rise, now pushing USD/JPY lower to test the 109 handle, as markets ignored the poor Japanese Services PMI and BOJ minutes.
The USD/JPY pair is at a brink of a bullish breakout, as it hit the 109.30 to later retreat twice in the last three months. The 4-hour chart shows that it has recovered above all of its moving averages, with the 20 SMA resuming its advance between the larger ones. Technical indicators have lost strength upward, holding within overbought levels, indicating absent selling interest. A break through the mentioned area should open doors for a rally toward the 110.00 level, while beyond this last, the pair would enter a bullish market.
Support levels: 109.00 108.65 108.20
Resistance levels: 109.30 109.60 110.00
· USD/CNH Technical Analysis: Below 7.00 for first since Aug. 5
USD/CNH is trading below 7 for the first time since Aug. 5.
The offshore Yuan (CNH) is being quoted less than 7 per US dollar for the first time since Aug. 5 and there is scope for further appreciation, as per the USD/CNH technical chart.
The pair closed below the 100-day moving average (MA) on Tuesday, bolstering the already bearish setup, as represented by the head-and-shoulders breakdown, descending 5- and 10-day MAs, and a below-50 reading on the relative strength index.
Note that the pair has found acceptance below the 100-day MA for the first time since early May and now looks set to test support at 6.9617 (July 6 high).
As of writing, the USD/CNH pair is trading at 6.9985.
· China and France reaffirmed their support for the Paris climate change agreement, saying they consider it an “irreversible process”, according to a joint statement issued on Wednesday.
They also reaffirmed their strong determination to improve international cooperation on climate change.
The Trump administration this week filed paperwork to withdraw the United States from the Paris Agreement on combating climate change.
The so-called phase one trade deal that the U.S. and China are expected to sign won’t solve all the problems the global economy faces right now, former U.S. Treasury Secretary Larry Summers said Wednesday.
· Summers said even if both sides sign the partial deal as planned, “there will still be large tensions and uncertainties” between the two countries — which would weigh on the global economy.
His comments echoed the sentiment of other analysts and company executives who said longstanding concerns about Chinese theft of U.S. intellectual property and forced technology transfers would take longer to resolve.
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· China and France signed contracts totaling $15 billion during a visit by President Emmanuel Macron, a Chinese government official said at a news briefing on Wednesday.
Deals were struck in the fields of aeronautics, energy and agriculture, including approval for 20 French companies to export poultry, beef and pork to China.
· Japan’s economy likely grew for a fourth straight quarter in July-September helped by solid domestic demand as consumers rushed to beat a sales tax hike, a Reuters poll found on Wednesday.
But the pace of growth was seen slowing from the second quarter as a strong typhoon and rainy weather countered strong domestic spending and weak external demand hurt exports.
· German industrial orders rose more than expected in September, helped by robust domestic demand, data showed on Wednesday, offering some respite in a tough third quarter for manufacturers in Europe’s largest economy.
Contracts for ‘Made in Germany’ goods rose 1.3% from the previous month, with demand for capital goods up 3.1%, the Statistics Office said. Orders from abroad were up 1.1% while domestic contracts rose by 1.6%.
· China’s exports and imports probably fell at a slightly faster rate in October, pointing to a worsening outlook for the country’s manufacturers as Beijing remains embroiled in a trade standoff with Washington, a Reuters poll showed.
The “phase one” deal is widely expected to include a U.S. pledge to scrap tariffs scheduled for Dec. 15 on about $156 billion worth of Chinese imports, including cell phones, laptop computers and toys.
China’s October exports are expected to have contracted for a third month, falling 3.9% from a year earlier, according to the median estimate of 26 economists in the poll, worsening from a 3.2% drop in September.
· Legendary macro hedge fund manager Paul Tudor Jones says that the 2020 presidential election will be “more meaningful” for markets than any other election he’s lived through.
“As an investor, you have to have a view on the election because the outcomes are so extreme. I've never seen this kind of polarity in elections as we have now,” the 65-year-old billionaire hedge funder said at the Greenwich Economic Forum in Connecticut on Tuesday.
During his fireside chat, Jones referenced a poll his firm ran that found if Senator Elizabeth Warren (D-MA) were to win in 2020 the S&P would trade at 2,250, down 27% from current levels. The model found that if South Bend, Indiana, Mayor Pete Buttigieg and former vice president Joe Biden were to win, the S&P would trade at 2,700, or 12% lower. Meanwhile, if Trump were re-elected, the model round that the S&P would trade around 3,600, or an increase of 17%.
· Oil prices fell on Wednesday, pulled down by a larger-than-expected build in U.S. crude stocks, after gaining for three sessions on expectations of an easing in U.S.-China trade tensions.
Brent crude futures LCOc1 stood at $62.58 a barrel by 0738 GMT, down 38 cents, or 0.6%. Brent settled up 1.3% on Tuesday.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell 30 cents, or 0.5%, to $56.93 per barrel, having closed up 1.2% in the previous session.
U.S. crude inventories rose by 4.3 million barrels in the week ended Nov. 1 to 440.5 million barrels, according to data from the American Petroleum Institute (API) released on Tuesday. That was nearly triple analysts’ forecast for an increase of 1.5 million barrels.
Official data from the Energy Information Administration (EIA) is due later on Wednesday.
Reference: Reuters, CNBC, FXStreet
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