January 6, 2017

Daily Observations:

The US dollar pared losses in Asia this morning, following a broad-based selloff over the past 2 days. China’s offshore yuan slumped after the PBOC strengthened its fixing by the most in more than 10 years. Asian indices were mixed, as equities in Japan and China fell, while stocks in Hong Kong, Korea and Singapore rose. Gold retreated back below the key $1,180/Oz level.

US:

  • ADP reported that US firms added 153,000 jobs in December, less than the 215,000 added in November and missing the median estimate of 260,000. Initial jobless claims last week fell to 235,000, less than the 260,000 expected.
  • US non-manufacturing ISM last month remained unchanged at 57.2, exceeding the consensus prediction of 56.8. 12 industries reported growth, led by mining and retail trade, compared to 3 sectors that reported contraction.
  • The Markit US services PMI rose to 53.9 from 53.4, while the composite PMI gained as well, advancing to 54.1 from 53.7.
  • The US dollar fell overnight together with Treasury yields while equities stagnated as asset moves sparked by Donald Trump’s election showed signs of faltering ahead of tonight’s US jobs report.
  • The Bloomberg Dollar Spot Index ended 1.0% down in New York, but managed to pare some losses in Asia this morning, rising 0.3%. The Dollar Index lost 1.2% overnight to close at a 3-week low.
  • The greenback’s slide could have been triggered by several factors, including China’s central bank muscling into the funding market to support the yuan, as well as improving economic data from China and Europe juxtaposed with US figures suggesting the job market may be softening.
  • Tonight’s US jobs report is expected to confirm a sixth straight year of adding more than 2 million jobs, a pace that could be difficult to sustain, and adding worries on whether economic growth can accelerate in the face of higher interest rates and a stronger currency.
  • The benchmark 10yr Treasury yield fell 10bps to 2.34%, its biggest drop since Brexit.
  • The S&P 500 Index declined 0.1%, paring earlier losses of as much as 0.5%. Financials were the main losers, while real estate and health care shares led gainers.

UK:

  • UK Prime Minister Theresa May sent her 2 most senior aides on a secret trip to the US last December in an attempt to build bridges with President-elect Donald Trump, May’s office confirmed in an emailed statement to Bloomberg.

China:

  • China is prepared to step up its scrutiny of US companies in the event Donald Trump takes punitive measures against Chinese goods and triggers a trade war between the 2 largest economies.
  • The options Chinese authorities are considering include subjecting well-known US companies or ones that have large Chinese operations to tax or antitrust probes. Other possible measures include the launch of anti-dumping investigations and scaling back government purchases of American products, according to a Bloomberg report.

Australia:

  • Australia recorded its first trade surplus in almost 3 years as Chinese demand pushed up prices for its 2 biggest exports, iron ore and coal. November’s trade balance came in at A$1.243 billion, up from –A$1.119 billion in the prior month, and exceeding the A$550 million surplus expected.
  • Exports climbed 8% from a month earlier, while imports were little changed.

Precious Metals:

  • Spot gold advanced by as much as 1.2% to $1,185.14/Oz before it pared gains and retreated back below the $1,180/Oz resistance level.
  • Gold is set for its largest weekly gain in 7 months amid a weakening US dollar and increasing demand for the metal ahead of the Lunar New Year.
  • The metal may experience some selling around $1,180/Oz, while $1,150/Oz and $1,125/Oz are likely to provide support.
  • Silver pared gains from its overnight high of $16.7207/Oz, back to its previous session’s close and remained little changed as of earlier today.

Oil:

  • Crude oil futures expiring in rose 0.9% to $53.76/bbl, erasing earlier gains after a government report showed US fuel stockpiles surged last week. A report that Saudi Arabia is cutting production as it implements an agreement to ease a global supply glut sparked the turnaround.

 

USDSGD:

  • Spot 1.4307
  • USDSGD fell for the third consecutive day, by as much as 0.6% to 1.4270 earlier today. The decline has been largely fuelled by a sell-off in the US dollar over the past 2 days.
  • The next important support level lies at 1.4150.

 

AUDUSD:

  • Spot 0.7338
  • AUDUSD added 0.9% and looks set to rise for the fourth straight day.
  • The next resistance level lies at 0.7382, and is expected to herald in renewed selling of the currency pair.

 

USDCAD:

  • Spot 1.3249
  • USDCAD’s decline shows no sign of abating, sliding 0.9% to 1.3192; the currency pair has fallen in 5 out of its past 6 trading sessions.
  • The support of 1.3100 will be key as it coincides with the 200-day moving average as well.

 

USDCNH:

  • Spot 6.8238
  • USDCNH rebounded off the 6.8000 handle, paring a weekly decline as the PBOC raised its daily fixing less than projected.
  • The PBOC strengthened its fixing earlier today, by 0.92% from 6.9307 to 6.8668 per US dollar, the most in more than a decade.
  • The psychological resistance of 7.0000 remains the key level to watch over the medium term, while the 2-month low of 6.7643 is expected to provide some support.

 

USDJPY:

  • Spot 115.80
  • USDJPY fell as much as 1.4% to the 115 handle before rebounding back to the 116 level.
  • The currency pair is expected to find some support around current levels. However, a clean break below 115 could result in a move lower to the 111 support.

 

GBPUSD:

  • Spot 1.2383
  • Sterling gained 1.1% against the greenback, rising to 1.1% to 1.2432 to a 2-week high last night, although it has since pared gains back below the 1.2400 handle.
  • Further support below comes in at 1.2090.
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