Key Updates

Key overnight events:

  • New York Fed President William Dudley said in an interview last night that “financial conditions are considerably tighter than they were at the time of the December meeting”, and that policy makers will take this into account when they meet next month to decide whether to raise rates again.
  • Investors have cut the probability of a rate hike next month to about 12% from 50% one month ago, according to fed-funds futures, which are also signalling that the next rate hike is not expected until next year.
  • US ISM non-manufacturing came in at 53.5, lower than the 55.1 reading forecasted.
  • The US dollar weakened by as much as 1.9%, its steepest intraday loss in 7 years, following Dudley’s comments and the softer-than-expected ISM non-manufacturing number.
  • Crude oil futures expiring in March bounced off the low of $29.40/bbl to close 8% higher, above the $32/bbl handle. Despite US crude inventories rising to more than 500 million barrels for the first time since 1930, oil prices rallied relentlessly as a news report from Iran stated that 6 oil-producing countries, which include Iran and Russia, have agreed to an emergency meeting.

 

USDSGD:

  • Spot 1.4143
  • Following broad USD weakness, USDGD dropped below the 100-day moving average of 1.4148 to a low of 1.4114.
  • 1.4000 remains the next level of resistance to be tested.

 

AUDUSD:

  • Spot 0.7185
  • On the back of a weaker USD and a broad commodity rally overnight, AUDUSD rallied 2.7% from the low of 0.7000 yesterday, making a high of 0.7191 this morning.
  • According to Bloomberg, the probability of a 25bps cut in RBA’s benchmark rate of 2% in the coming 6 months rose to 92% today.

 

USDCAD:

  • Spot 1.3749
  • After reaching a high of 1.4103 yesterday, USDCAD reversed drastically, breaking past 2 levels of resistance in the process. The psychological handle 1.4000 and 2016 low of 1.3816 were both taken out in a single down move overnight, as USDCAD sank to a low of 1.3721.
  • The 100-day moving average of 1.3555 remains a short distance away and could provide decent support.

 

USDCNH

  • Spot 6.6136
  • Bloomberg reports that PBOC plans to loosen rules on foreign investors bringing money in and out of the country, according to people with knowledge of the matter.
  • There has been speculation that CNH-CNY gap may widen towards 1000 pips during the Chinese New Year holiday, and that may force the PBOC to intervene in the market.
  • China has set a range for its economic growth target for the first time in 20 years. It is targeting an economic expansion of 6.5% – 7% for 2016, slower than last year’s goal of 7%.
  • USDCNH retraced back from a high of 6.6512 yesterday to a low of 6.5982 this morning as the PBOC raised the yuan’s daily reference rate by the most in two months, reinforcing policy makers’ pledges that the exchange rate would not be weakened to boost China’s economy. The yuan fix strengthened by 0.16% to a 4-week high of 6.5419.

 

USDNOK:

  • Spot 8.5363
  • USDNOK sank to a low of 8.5261 this morning, 2.5% lower from the high of 8.7462 yesterday, taking out the 100-day moving average of 8.5589 in the process.
  • The next support level of 8.4601, a 3-month low, looks set to be tested next.
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UEN: 201419754M

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