December 28, 2016

Daily Observations:

Most Asian equities rose amid thin trading this morning, taking the lead from US stocks’ advances overnight. The US dollar continues to fluctuate near its highs, while crude and gold both slipped earlier today following overnight gains.

US:

  • US December consumer confidence rose to 113.7 from an upwardly-revised 109.4 in November, soundly beating the consensus estimate of 109.0.
  • The Richmond Fed manufacturing index doubled from 4 to 8 in December, exceeding the expected reading of 5. The Dallas Fed manufacturing activity index was better than expected as well, registering a reading of 15.5, higher than the 10.2 predicted.
  • US stocks traded near a record high amid thin trading overnight. The S&P 500 Index extended its monthly advance by 0.2%, with volume about 50% below its 30-day average, while the Nasdaq Composite Index rose to an all-time high.
  • Volume is expected to be thin in the last week of trading for a volatile year, after investors powered past shocks from the Brexit vote to Donald Trump’s presidential win, propelling US equities to record highs. The dollar meanwhile jumped to a multi-year peak.
  • The benchmark 10yr Treasury yield rose 2bps to 2.56%, after posting its first weekly advance last week since the US presidential election. The 10yr yield rose to a 2 year-high 0f 2.64% two weeks ago, but has since fluctuated below the 2.60% level.
  • The US dollar continued to hover around its highs; the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, gained 0.1% overnight.

Japan:

  • Industrial production last month rose 1.5% month-on-month and 4.6% year-on-year, missing estimates of 1.7% and 4.7% respectively.
  • Retail trade over the same period gained 1.7% from a month earlier and 0.2% from a year earlier, exceeding median estimates of 0.8% and -0.5% respectively.

China:

  • According to the China Beige Book, the nation’s economy showed improvement in the fourth quarter with gains across all industries. Revenues, profits, jobs and capital expenditures improved from last quarter while new orders were stable, the survey further stated.
  • The first day of 2017 is when an annual $50,000 quota to convert the yuan into FX resets, stoking concern there will be a rush to sell the local currency.

Singapore:

  • Restructuring specialists at Hogan Lovells Lee & Lee said Singapore remains a bellwether for distressed companies in the larger Asean and Asian regions. Regional non-bank borrowers are facing $76 billion of dollar bonds maturing in 2017, 24% more than this year, and rising interest rates could push more commodities and shipping companies into delinquency.
  • According to data compiled by Bloomberg, real estate firms in APAC face $9 billion of dollar bonds due in 2017, while energy-related companies must repay $12 billion.

Precious Metals:

  • Spot gold gained 0.9% in New York to $1,143.54/Oz, trimming an earlier advance which propelled the precious metal to a 2 week-high of $1,150.75/Oz.
  • With $1,150/Oz a new resistance level, any further recovery for gold depends if the current resistance level can be breached.
  • The next support level below comes in at $1,125/Oz.
  • Spot silver advanced as well, ending 1.6% higher at $15.9880/Oz.

Oil:

  • Crude oil for February delivery rose 1.7% to $53.90/bbl, after Saudi Arabia Energy Minister Al-Falih reassured last week that prices are set to recover next year as production cuts help to rebalance an oversupplied market.

 

USDSGD:

  • Spot 1.4485
  • USDSGD was little changed earlier today, after briefly making a new 7 year-high last night following better-than-expected manufacturing index data in the US.
  • The 1.4500 level should continue to provide significant resistance. Support can be found below at the 1.4400 and 1.4150 levels.

 

AUDUSD:

  • Spot 0.7202
  • AUDUSD trimmed some of its overnight losses, gaining 0.3% to 0.7209 earlier this morning.
  • The key support level remains at 0.7145.

 

USDCAD:

  • Spot 1.3576
  • USDCAD approached its key resistance level and 10 month-high of 1.3589, rising 0.4% to 1.3580 earlier today.
  • A slew of poorer-than-expected economic data over the past 2 weeks, including manufacturing sales, GDP and CPI, coupled with the recent Fed interest-rate hike, have propelled the currency pair more than 3.5% higher from the 1.3100 handle.

 

USDCNH:

  • Spot 6.9533
  • The yuan remained little changed, after the PBOC lowered its fixing earlier this morning by 0.05% to 6.9495 to the US dollar.
  • The 6.9710 high on Dec 17th continues to act as a resistance point. .

 

USDJPY:

  • Spot 117.61
  • USDJPY has been well-supported above 117.00 over the past 2 weeks, and gained as much as 0.4% earlier today to 117.74.

 

GBPUSD:

  • Spot 1.2290
  • GBPUSD rebounded from near 2 month-lows, rising 0.2% to 1.2294 earlier.
  • The 1.2300 handle represents a region of resistance, and it still remains to be seen if the pound can reverse its recent weakness.
  • The pound has weakened about 3.8% against the dollar over the past three weeks as uncertainty around the Brexit process continues to weigh on the currency.
  • The next support below comes in at 1.2090.
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