Trading news

Commodity currencies on the rise, Russian Industrial Production at stake amid lingering low imports

- Commodity currencies extended gains in Asia as traders were reassured by the Chinese data, which points towards a stabilisation of the world’s second biggest economy

- South Korean won surged 0.75% against the US dollar amid better-than-expected job report although despite this encouraging data, the overall trend in unemployment is rather increasing as the country suffers acutely from the slowdown of the Chinese economy

- We don’t expect further won strength as the market had already priced in the last dovish comments from the Federal Reserves

- The New Zealand dollar is lacking the strength required to break 0,69-0,70 resistance area as traders are still hoping for signs of improvement in the US economy before starting to price in again a potential rate hike by the US central bank

- Australian dollar, the fact that the daily RSI indicator continues to move lower, while AUD/USD continues to push higher highlights a bearish divergence and suggests that a correction in AUD/USD in looming

- Canadian dollar may surge further to 1,2745, should crude oil prices stabilise

- Current rebound in oil prices and Fed dovish stance may also push Russian stocks higher and ruble to strengthen 

 

In Asia, the South Korean won surged 0.75% against the US dollar amid a better-than-expected job report. Unemployment (seasonally adjusted) came in at 3.8% in March versus 3.9% median forecast, down from 4.1% in the previous month. Despite this encouraging data, the overall trend in unemployment is in fact increasing as the country suffers acutely from the slowdown of the Chinese economy. After opening at 1,152.39, USD/KRW slipped to 1,147.80. The pair has been treading water above the 1,140 level since early March and we don’t expect further won strength as the market has already priced in the most recent dovish comments from the Federal Reserve.

China's latest batch of economic data is rather positive with industrial production rising the most in almost a year. Industrial output rose 6.8% in March compared to a year earlier, while the market was expecting a figure closer to 5.9%. Retail sales also came in above market expectation, printing at 10.5%y/y in March versus 10.4% median forecast. Finally, China’s GDP for the first quarter printed at 6.7%y/y - the lowest level since the financial crisis - matching forecasts but down from 6.8% in the December quarter.

However, Asia equity markets are set to end up the week on the back foot, suggesting that traders were expecting a stronger signal from the Chinese economy. Chinese and Japanese shares slipped lower, while equity indices in Australia, New Zealand and Singapore edged higher.

Commodity currencies extended gains in Asia as traders were reassured by the Chinese data, which points towards a stabilisation of the world’s second biggest economy. The New Zealand dollar surged almost 0.70% overnight to test the 0.69-0.70 resistance area for the third time since the beginning of the month. For now, the pair is lacking the strength required to break this key resistance area as traders are still hoping for signs of improvement in the US economy before restarting attempts to price in a potential rate hike by the US central bank. The Australian dollar was also buoyed with AUD/USD stumbling on the 0.7720 resistance once again. The fact that the daily RSI indicator continues to move lower, while AUD/USD continues to push higher, highlights a bearish divergence and suggests that a correction in AUD/USD in looming. 

The Canadian dollar surged 0.30% in Tokyo as crude oil prices stabilised. The West Texas Intermediate held ground at around $41.60 a barrel, while its counterpart from the North Sea, the Brent crude, was trading slightly below the $44 threshold. Overnight, USD/CAD fell to 1.28. On the downside, a support can be found at 1.2745, while on the upside a resistance at 1.2897.

 

Yann Quelenn, market analyst: Russian Industrial Production at stake amid lingering low imports: Markets expect the Russian industrial production to recover. March data is forecasted at -1% y/y declining from February when it rebounded at 1% y/y. Remember that in the course of last year, industrial production fell by 3.4% y/y. During the same timeframe, imports collapsed, diminishing by 40%. It therefore follows that the domestic economy has not managed to filled the gap left empty by the lesser quantity of western goods. In other words, additional parts of the economy are at stake and when looking at the fundamentals, massive inflation and low commodities prices continue (despite recent rebound) to weigh on the country. It also signals that Russian’s reliance on commodities is greater than what was believed by the financial markets.

The ruble is nevertheless strengthening against the greenback. One dollar is worth just over 66 ruble. The current rebound in oil prices is pushing Russian stocks higher and the currency keeps on appreciating. Finally, the Fed's dovish stance should benefit the Russian currency and we believe the ruble will continue to strengthen.” ---

Today traders will be watching unemployment rates from Turkey; the trade balance from Italy; manufacturing sales from Canada; Empire Manufacturing, industrial production, capacity utilisation and Michigan sentiment index from the US

Friday, 15 Apr, 2016 / 9:30

Note: Company News is a promotional service of the Directory and the content isn't created by Finance Magnates.

Source : http://swissquote-fx.com/en/research-and-analysis/

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