January 17, 2017

Daily Observations:

Equities in China earlier extended a rout to six straight days, its worst run in 3 years. Meanwhile, the yen and gold gained as safe haven demand picked up ahead of UK PM Theresa May’s Brexit speech later today and US president-elect Donald Trump’s inauguration later this week.

US:

  • US markets remained shut last night due to Martin Luther King Day.
  • Nonetheless, the US dollar experienced some buying overnight, following its recent sell-off over the previous few days. The Bloomberg Dollar Index, which tracks the greenback against 10 major peers, gained 0.4%, snapping a 3-day losing streak.
  • Treasuries resumed trading this morning following a long weekend break, with the 10yr benchmark yield 3bps lower at 2.37% earlier today, following increased investor demand in safe haven assets ahead of UK Prime Minister’s May’s widely-anticipated speech on Brexit later today.

UK:

  • The UK is likely to pull out of the EU’s single market for goods and services and seek a completely new trading relationship with the bloc, UK Prime Minister is reportedly set to announce later today, according to extracts released by her office.
  • May will use her speech in London in explicitly express that she has no interest in a “partial” or “associate” membership of the EU or anything that leaves them “half-in, half-out”.
  • Bank of England Governor Mark Carney said policy markets will be monitoring developments closely as the impact of a weakening pound feeds through to prices, adding that consumer spending in 2017 is likely to face fresh headwinds and thus curb economic growth.
  • Carney further reiterated the committee’s neutral monetary policy stance, stressing that interest rates can go up as well as down, and that there are limits to the extent to which an overshoot above the 2% inflation target can be tolerated.
  • Donald Trump’s promise of a speedy US-UK trade deal has strengthened PM May’s case for a “hard” Brexit, showing her European negotiating partners that the UK has a powerful friend who wants Brexit to be a success and the Britain has alternative markets to trade with.

China:

  • The IMF upgraded its growth forecast for China in 2017 to 6.5%, 0.3 percentage points higher than their October forecast last year, on the back of expectations for continued government stimulus. However, the fund repeated a warning that China’s credit-fuelled recovery could manifest deeper problems such as an increased in total debt.
  • According to a Bloomberg macro report, China ended 2016 on a firm note after a rocky start to the year. Consumption is holding up, factories have pulled out of a 4-year streak of deflation and overall growth is expected to comfortably meet the government’s target. Analysts expect another year of solid growth ahead of a twice-a-decade reshuffle of the Communist Party’s top leadership scheduled of later this year.

Australia:

  • Home loans in November last year grew more than expected, up 0.9% from October and surpassing the 0.3% gain predicted. Investment lending jumped 4.9%, accelerating from a 1.5% gain in the month prior.

Singapore:

  • Non-oil domestic exports in December grew 9.4% from a year earlier, beating the median estimate of 5.8% but failing to keep up with the prior month’s pace of 11.5%.
  • Electronic exports rose 5.7% over the same period, accelerating from a 3.5% gain in the month prior.
  • In a statement released by Moody’s, Singapore’s 3 largest banks are expected to face continued downward pressure on their solvency metrics of asset quality and profitability in 2017, due to increased risks of non-performing loans.

Precious Metals:

  • Spot gold edged 0.3% higher to $1,205.35/Oz, following increased safe haven asset demand ahead of a key Brexit speech by UK PM May later today.
  • The precious metal continue to remain below its 7-week high of $1,208.72/Oz, although a clean break above it could see the metal rise to the next level of $1,230/Oz. $1,180/Oz represents the support level below.
  • Silver for immediate delivery was little changed as well, after trading 0.2% to a session-high of $16.8570/Oz.

Oil:

  • Crude oil futures expiring in February edged higher and maintained above the $52/bbl handle, after Saudi Arabia Energy Minister Khalid Al-Falih said he expects recent OPEC production cuts to bring the market back to balance by middle of this year.
  • Meanwhile, Nigeria increased its output by 400,000 to 1.94 million bpd.

 

USDSGD:

  • Spot 1.4276
  • USDSGD fell back below the 1.4300 handle, losing 0.2% to 1.4276 earlier.
  • USDSGD added 0.2% to 1.4309, following its rebound off a 1-month low last Friday.
  • Support and resistance levels come in at 1.4150 and 1.4410 respectively.

 

AUDUSD:

  • Spot 0.7475
  • AUDUSD fell 0.5% yesterday, the currency pair’s first negative session out of the past ten. The pair pared some of its losses, gaining 0.2% today to 0.7484, but continues to struggle to retest the 0.7500 resistance.
  • With both the 100- and 200-day moving averages coinciding at 0.7500 as well, the least path of resistance will be towards the downside for the time being. A retreat back to the 0.7400 handle seems likely.

 

USDCAD:

  • Spot 1.3169
  • USDCAD advanced 0.3% to 1.3189 earlier today and looks set to gain for the third straight day.
  • The currency pair has undergone a sharp reversal following last Thursday 1.5% decline to almost a 3-month low of 1.3030.
  • Continued support above the 1.3100 200-day moving average could push the currency pair further to 1.3200.

 

USDCNH:

  • Spot 6.8640
  • The PBOC weakened its fixing for the first time in 4 days, by 0.17% to 6.8992 per US dollar.
  • USDCNH initially gained as much as 0.2% to 6.8709, but soon pared gains to decline back towards its previous session’s close.

 

USDJPY:

  • Spot 114.11
  • USDJPY was little changed, as the pair continues to fluctuate between 115 and 113.50. Volatility is expected to increase ahead of a key Brexit speech by UK PM May later today.

 

GBPUSD:

  • Spot 1.2061
  • GBPUSD was little changed earlier today, recovering from earlier declines to a low of 1.2018.
  • The next support level below comes in at 1.1841, while resistance above is expected at 1.2200.
© Jachin Capital Pte Ltd

UEN: 201419754M

The contents of this document are for information only and is taken or compiled from sources that we, Jachin Capital Pte Ltd, believe to be reliable. To the maximum extent permitted by law, we do not make any representation or warranty (express or implied) that this information is accurate, timely or complete and it should not be relied upon as such. Opinions expressed are our current opinions as at the date of this document only and are subject to change without notice. We endeavour to update on a reasonable basis the information discussed but regulatory, compliance or other reasons may prevent us from doing so. The publication and distribution of this document is not and does not imply any form of endorsement of any person, entity, service or product described or appearing here. This is not and does not constitute or form an offer to buy or sell nor the solicitation of an offer to buy or sell any security or financial instrument nor to participate in any particular trading or investment strategy. We are not soliciting any action based on this document. The information, services and products described or appearing here are intended only for Accredited Investors (as currently defined in the Securities and Futures Act) and are not intended for nor targeted at the public in any specific jurisdiction. This information does not take into account the particular investment objectives, financial situations or needs of individual investors. Investors should seek independent financial, tax or legal advice or make independent investigations as considered necessary or appropriate before making an investment decision. Investments involve risk. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment instrument.

Essential SSL