11 Aug 2015
PBOC Yuan fix drags Asia lower on risk-off, ZEW – Next in focus
FXStreet (Mumbai) - What came in as a shocking move by the People's Bank of China (PBOC) in early Asia was actually instigated by weaker Chinese trade data released over the weekend. The central bank allowed the yuan to depreciate almost 2% against the US dollar, its biggest daily drop ever. The Antipodeans currencies came under fire as a result of yuan devaluation while safe-havens such as US dollar, yen were better bid amid risk-off sentiments.
Key headlines in Asia
PBOC: Yuan depreciation a sporadic event
Yuan: The end of the fix as we know it - ANZ
Australia's NAB business confidence: Exuberant July readings pared back
Dominating themes in Asia - centered on JPY, AUD, NZD
A data-light Asian calendar with PBOC yuan fix emerging as the key event this session. The central bank’s latest measure in a bid to spur the slowing economic growth sent a shock wave across the FX markets, fuelling risk-off sentiments. Safe haven assets such as US dollar, yen were slightly higher as yuan devaluation spooked markets signaling concerns over the health of the world’s second largest economy – China.
The Aussie plunged more than 100 pips to trade back on the 0.73 handle after PBOC devalued the nation's currency to its lowest rate against the US dollar in nearly three years. The latest Yuan reference rate was set at 6.2298, prior close 6.2097. The move was a 1.9% "one-off deprecation" to make the exchange rate more market oriented, the central bank said.
The New Zealand dollar was also dumped one big figure versus its American counterpart to 0.6540 lows as the Antipodeans were negatively impacted by Yuan fix as the Chinese companies purchasing products from OZ economies will have less purchasing power. China is the top export destination for Australia and New Zealand.
USD/JPY faded a spike to 124.89 and now trades around 124.70 as the latest move by PBOC is widely expected to pressure USD/Asia currencies up, lending a helping hand to the major.
Asian markets are mostly trading in the negative territory with Nikkei in Tokyo losing -0.66% at 20672. While benchmark Australian S&P/ASX 200 index trades -0.64% lower at 5473 points. While Chinese stocks traded mixed as markets assess the latest news from PBOC. Hong Kong's benchmark Hang Seng index advances 0.82% at 24723 while mainland China's benchmark Shanghai Composite loses -0.40% now and trades near 3912.
Heading into Europe - centered on EUR, GBP
The EUR macro calendar ahead offers a few economic updates from the Euro zone with ZEW surveys from Germany and Euro zone 19-member bloc as a whole to be reported. While German WPI data will kick-off a data-light session ahead.
The ZEW will release its Economic Sentiment Index for the next six months for Germany, as well as the Current Situation Index, reflecting institutional investors' opinions of the current situation. Economic sentiment is seen heading up to 31.0 in August from 29.7 measured in July, while the Current Situation Index is also expected to rise to 64.0 from 63.9 in the previous month.
Looking ahead, traders now shift their focus towards a set of US macro releases including the Prelim unit labor costs and Prelim nonfarm productivity for further momentum on USD moves. While 2nd tier from Canada - housing starts data will also be closely watched.
EUR/USD Technicals
Valeria Bednarik, Chief Analyst at FXStreet explained, “The technical picture is still bullish in the short term, as the 1 hour chart shows that the price extended well above its moving averages, with the shortest above the largest and maintaining its bullish slope. In the same chart, the technical indicators have lost their upward strength, but remain above their mid-lines.”
“In the 4 hours chart the technical indicators maintain a strong upward momentum whilst the 20 SMA contained the downside, supporting additional advances, particularly on a break above 1.1045, a daily descendant trend line coming from 1.1435, and the immediate resistance.”
Key headlines in Asia
PBOC: Yuan depreciation a sporadic event
Yuan: The end of the fix as we know it - ANZ
Australia's NAB business confidence: Exuberant July readings pared back
Dominating themes in Asia - centered on JPY, AUD, NZD
A data-light Asian calendar with PBOC yuan fix emerging as the key event this session. The central bank’s latest measure in a bid to spur the slowing economic growth sent a shock wave across the FX markets, fuelling risk-off sentiments. Safe haven assets such as US dollar, yen were slightly higher as yuan devaluation spooked markets signaling concerns over the health of the world’s second largest economy – China.
The Aussie plunged more than 100 pips to trade back on the 0.73 handle after PBOC devalued the nation's currency to its lowest rate against the US dollar in nearly three years. The latest Yuan reference rate was set at 6.2298, prior close 6.2097. The move was a 1.9% "one-off deprecation" to make the exchange rate more market oriented, the central bank said.
The New Zealand dollar was also dumped one big figure versus its American counterpart to 0.6540 lows as the Antipodeans were negatively impacted by Yuan fix as the Chinese companies purchasing products from OZ economies will have less purchasing power. China is the top export destination for Australia and New Zealand.
USD/JPY faded a spike to 124.89 and now trades around 124.70 as the latest move by PBOC is widely expected to pressure USD/Asia currencies up, lending a helping hand to the major.
Asian markets are mostly trading in the negative territory with Nikkei in Tokyo losing -0.66% at 20672. While benchmark Australian S&P/ASX 200 index trades -0.64% lower at 5473 points. While Chinese stocks traded mixed as markets assess the latest news from PBOC. Hong Kong's benchmark Hang Seng index advances 0.82% at 24723 while mainland China's benchmark Shanghai Composite loses -0.40% now and trades near 3912.
Heading into Europe - centered on EUR, GBP
The EUR macro calendar ahead offers a few economic updates from the Euro zone with ZEW surveys from Germany and Euro zone 19-member bloc as a whole to be reported. While German WPI data will kick-off a data-light session ahead.
The ZEW will release its Economic Sentiment Index for the next six months for Germany, as well as the Current Situation Index, reflecting institutional investors' opinions of the current situation. Economic sentiment is seen heading up to 31.0 in August from 29.7 measured in July, while the Current Situation Index is also expected to rise to 64.0 from 63.9 in the previous month.
Looking ahead, traders now shift their focus towards a set of US macro releases including the Prelim unit labor costs and Prelim nonfarm productivity for further momentum on USD moves. While 2nd tier from Canada - housing starts data will also be closely watched.
EUR/USD Technicals
Valeria Bednarik, Chief Analyst at FXStreet explained, “The technical picture is still bullish in the short term, as the 1 hour chart shows that the price extended well above its moving averages, with the shortest above the largest and maintaining its bullish slope. In the same chart, the technical indicators have lost their upward strength, but remain above their mid-lines.”
“In the 4 hours chart the technical indicators maintain a strong upward momentum whilst the 20 SMA contained the downside, supporting additional advances, particularly on a break above 1.1045, a daily descendant trend line coming from 1.1435, and the immediate resistance.”