The US Dollar is struggling against ASEAN currencies despite weakness in the S&P 500. Capital remains flowing into emerging markets, keeping USD under pressure, could this change? Trade ideas thread – Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:
By Eamonn Sheridan Federal Reserve Chairman Powell said the central bank remains committed to supporting the economy through its tools “for as long as it takes.” He also noted that “many economic indicators show marked improvement,” though the path forward “continues to be highly uncertain.” Trader confidence remains poor in riskier assets like stocks, the Australian Dollar and Sterling, while even gold, silver and the Japanese Yen are dropping as the US Dollar attracts most haven buying. Stocks traded choppily and then rose Tuesday on the heels of another sharply negative day for US equities. The S&P 500 fluctuated between gains and losses, after falling for a fourth straight session on Monday for its longest losing streak since February.
- US Dollar struggling versus ASEAN FX despite weakness in the S&P 500
- Has risk aversion materially shifted capital flows into emerging markets?
- Could further weakness in US equities spillover outwards, boosting USD?
The haven-linked US Dollar underperformed its ASEAN counterparts such as the Singapore Dollar, Malaysian Ringgit, Indonesian Rupiah and Philippine Peso. This is despite a third consecutive week of losses in the S&P 500. Investors often look to the world’s largest economy as a bellwether for the shape of global growth. Thus, weakness in equities there can sometimes spread outward. What might explain this deviation?
Notable standouts this past week were the Malaysian Ringgit and Indonesian Rupiah. USD/MYR fell 0.94% in the best 5-day performance in 6 weeks. USD/IDR dropped 1.40%, the most since the beginning of June. As expected, the Indonesian Central Bank strengthened its tone towards intervening in the foreign exchange market to uphold the value of IDR. That likely played a key roll in giving its currency some strength.
*ASEAN-Based US Dollar Index averages USD/SGD, USD/IDR, USD/MYR and USD/PHP
Capital flows can often have a key role in driving SGD, IDR, MYR and PHP. On the next chart below, while the S&P 500 can be seen taking a dip since late August, capital continues to flow into emerging market economies. Typically, these two tend to move in tandem, meaning that as the S&P 500 rises or falls, the latter tends to follow. While correlation can be positive, it does not imply causation.
The recent divergence between the two could suggest that the fundamental forces driving equities lower in the United States might be perceived as carrying less knock-on consequences for global financial markets. This may be caused by a combination of rising concern over tech stock valuations, of which are a key component of American benchmark stock indexes, and perhaps political uncertainty ahead of the presidential election.
With that in mind, the US Dollar could struggle to catch a bid against ASEAN currencies, keeping USD/SGD, USD/IDR, USD/MYR and USD/PHP from pushing too much higher. Yet, investors ought to not discount the possibility that a slowdown in the US reverberates outward. The Citi Economic Surprise Index tracking the US is at its lowest since late June, extending the top from historical peaks in July.
While the value is still positive, its shrinkage suggests that economists’ expectations are slowly closer aligning to reality, and that same level of pessimism in forecasts is fading. The decreasing tendency for economic data to surprise to the upside could be a warning sign that the road ahead will be increasingly tougher. That may in turn offer a path for the Greenback to find a bottom as investors assess the stalling of growth.
Taking this into account, Markit US PMI data may be closely eyed on Wednesday for further signs into the country’s recovery. This will then be followed by initial jobless claims and new home sales on Thursday, wrapping up with durable goods orders on Friday. Disappointing outcomes here could offer some support to the haven-oriented US Dollar.
Focusing on ASEAN event risk, Singapore industrial production on Friday may offer insight into how global growth is performing. That is because the nation is heavily reliant on the external sector. But, USD/SGD may focus on external risks. The Malaysian Ringgit may also look past local CPI data on Wednesday. The Bank of Malaysia last left rates on hold, anticipating inflation to pick up in 2021 is 2020 pressures remain muted.
On September 18th, the 20-day rolling correlation coefficient between my ASEAN-based US Dollar index and my Wall Street index was 0.02 versus -0.67 from one week ago. Values closer to -1 indicate an increasingly inverse relationship, though it is important to recognize that correlation does not imply causation.
Chart Created Using TradingView
*ASEAN-Based US Dollar Index averages USD/SGD, USD/IDR, USD/MYR and USD/PHP
*Wall Street Index averages S&P 500, Dow Jones and Nasdaq 100 futures
— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
Author: Daniel Dubrovsky
Trade ideas thread – Wednesday 23 September 2020
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Australia leads gains in mixed trading day for Asia-Pacific markets; South Korea sees continued losses
SINGAPORE — Stocks in Asia-Pacific were mixed in Wednesday trade as investors react to recent comments from Federal Reserve Chairman Jerome Powell.
Shares in Australia led gains among the region’s major markets, with the S&P/ASX 200 in Australia jumping 2.18%.
Mainland Chinese stocks were also higher, with the Shanghai composite above the flatline while the Shenzhen component added 0.366%. Hong Kong’s Hang Seng index was little changed.
Elsewhere, South Korea’s Kospi shed 0.12%, adding on to losses following Tuesday’s decline of more than 2%.
Stocks in Japan were also lower in their first trading day of the week following holidays on Monday and Tuesday. The Nikkei 225 slipped 0.37% while the Topix index dipped 0.44%.
Overall, the MSCI Asia ex-Japan index advanced 0.17%.
In a prepared testimony, the Fed’s Powell said the central bank remains committed to supporting the economy through its tools “for as long as it takes.” He also noted that “many economic indicators show marked improvement,” though the path forward “continues to be highly uncertain.”
The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 94.187 following its rise earlier this week from levels below 93.5.
The Japanese yen traded at 105.07 per dollar following a weakening from levels around 104.4 against the greenback yesterday. The Australian dollar changed hands at $0.7125, having weakened from levels above $0.725 this week.
Oil prices were lower in the afternoon of Asian trading hours, with international benchmark Brent crude futures down 0.6% to $41.47 per barrel. U.S. crude futures shed 0.75% to $39.50 per barrel.
Author: Eustance Huang
Market Sentiment Still Negative Towards EUR/USD, GBP/USD, AUD/USD | Webinar
- Trader confidence in riskier assets such as stocks, the Australian Dollar, Sterling and the Euro remains weak and, although a near-term rally is possible, the longer-term outlook remains bleak.
- As for the traditional safe havens, the US dollar still seems the asset of choice rather than gold, silver, the Japanese Yen or the Swiss Franc.
Traders are continuing to shun riskier assets such as stocks and risk-on currencies like the Australian Dollar, Sterling and the Euro on fears of a second coronavirus lockdown in Europe, banking woes, delays in agreeing a fiscal stimulus program in the US and the vacancy on the US Supreme Court.
While a near-term bounce cannot be ruled out, the outlook for the next week or two remains poor, with even assets that are usually seen as safe havens, such as gold, the Japanese Yen and the Swiss Franc underperforming the US Dollar.
Chart by IG (You can click on it for a larger image)
In this webinar, I looked at the trends in the major currency, commodity and stock markets, at the forward-looking data on the economic calendar this week, at the IG Client Sentiment page on the DailyFX website, and at the IG Client Sentiment reports that accompany it. You might also like to check out the DailyFX Trading Global Markets Decoded podcasts.
— Written by Martin Essex, Analyst and Editor
Feel free to contact me on Twitter @MartinSEssex
Author: Martin Essex, MSTA
Stock market news live updates: Stocks rise, shaking off earlier losses as tech recovers
Stocks traded choppily and then rose Tuesday on the heels of another sharply negative day for US equities. The S&P 500 fluctuated between gains and losses but closed higher, after falling for a fourth straight session on Monday for its longest losing streak since February.
[Click here to read what’s moving markets heading into Wednesday, September 23]
The Nasdaq outperformed, rising more than 1.7% as Apple (AAPL), Amazon (AMZN) and Facebook (FB) increased. Tesla (TSLA) shares dropped 5.6%, giving back some steep recent gains ahead of its highly anticipated inaugural Battery Day event.
A blend of uncertainty around the election, a worsening coronavirus situation in Europe and parts of the US, scrutiny over big banks and concerns that further economic stimulus may not come to near-term fruition have combined to weigh heavily on equity investors, sending the S&P 500 now more than 8% below its Sept. 2 closing high. And while many tech stocks shook off earlier losses to close higher on Monday and rose on Tuesday, the group as a whole has been under press the past few weeks following a run-up earlier this summer.
“Coming into September, the options market among other things and the figures on public participation showed that there was a lot of froth, particularly in the high-flying Nasdaq-type stocks. And from our point of view, the weakness in September is pretty reliable from a seasonal perspective,” Julian Emanuel, BTIG managing director and chief equity derivatives strategist, told Yahoo Finance.
In terms of whether equities may slide further, “We think you have further to go,” Emanuel added. “We’re keying off the 200-day moving average to the S&P 500, currently at about 3,100 versus 3,250 or so where we are, so certainly more there, and likely a bit more than that in the Nasdaq, which really had gotten ahead of itself.”
“We have been in an environment where the Vix (^VIX) has hovered in and around 30 essentially since March,” he said, referring to the volatility-tracking index that spiked to as high 82 in March before easing. “And when you back that out, that’s part of why the markets advanced as much as they did. But when you’re thinking about how much the market should correct, you know, a normal sort of 5% to 10% correction in the S&P 500 was appropriate in a Vix environment of, call it 15 to 20. We’re in a higher volatility environment – probably means probably pullback in our view.”
Investors also continued to eye updates on fiscal stimulus, though prospects of another package passing through Congress before the November elections have dimmed. Congressional lawmakers directed questions around the pace of the economic recovery, and sought commentary around monetary and fiscal stimulus developments from Federal Reserve Chair Jerome Powell and US Treasury Secretary Steven Mnuchin on Tuesday during a hearing before the House Financial Services Committee.
Here were the main moves in markets as of 4:05 p.m. ET:
S&P 500 (^GSPC): +34.51 (+1.05%) to 3,315.57
Dow (^DJI): +140.48 (+0.52%) to 27,288.18
Nasdaq (^IXIC): +184.84 (+1.71%) to 10,963.64
Crude (CL=F): +$0.24 (+0.61%) to $39.55 a barrel
Gold (GC=F): -$3.90 (-0.20%) to $1,906.70 per ounce
10-year Treasury (^TNX): -0.7 bps to yield 0.6640%
The three major indices pushed into positive territory Tuesday afternoon, with the Nasdaq leading the way higher with a gain of more than 1.3%. Each of the Big Tech FAANG names, plus Microsoft, rose in afternoon trading.
Here were the main moves in markets, as of 2:08 p.m. ET:
S&P 500 (^GSPC): +25.16 points (+0.77%) to 3,306.22
Dow (^DJI): +95.04 points (+0.35%) to 27,242.74
Nasdaq (^IXIC): +134.18 points (+1.26%) to 10,914.54
Crude (CL=F): +$0.19 (+0.48%) to $39.50 a barrel
Gold (GC=F): -$0.70 (-0.04%) to $1,909.90 per ounce
10-year Treasury (^TNX): -0.2 bps to yield 0.669%
Deaths related to Covid-19 in the US crossed the grim milestone of 200,000 as of Tuesday morning, according to data from Johns Hopkins University.
The US has seen the most Covid-19 cases and deaths in the world, based on data tracked by the university. Brazil has counted the second-highest number of coronavirus-related deaths at 137,000 as of Tuesday.
Cases in the US have totaled more than 6.8 million, followed by India with nearly 5.8 million.
Treasury Secretary Steven Mnuchin, in answering a question asked by Rep. Patrick McHenry (R., N.C.), said that the next stimulus package coming out of Congress should more narrowly target helping children and preserving jobs in industries most impacted by the pandemic, including travel, leisure and restaurants. He said he would be in favor of extending the Paycheck Protection Program, and allowing vulnerable businesses to take out second loans under the program.
The three major indices were mixed Tuesday mid-morning as an early advance lost steam. The financials, health-care and energy sectors led declines in the S&P 500, and the index as a whole held near the flat-line shortly after 11:15 a.m. ET.
The Dow was lower by nearly 100 points, with UnitedHealth, Goldman Sachs and Dow Inc leading to the downside.
US existing home sales rose 2.4% month over month to a seasonally adjusted annual rate of 6.00 million in August, the National Association of Realtors said Tuesday. This matched consensus expectations, based on Bloomberg-compiled estimates. Sales were up 10.5% over the same month last year, extending the housing market’s strong recovery off the lows of the pandemic era.
While August’s gain marked the third straight monthly rise in sales of previously owned homes, it was a significant slowdown from the more than 20% increases recorded in each of July and June. In July, existing home sales had risen by a 24.7% for the highest monthly gain recorded in data going back to 1968.
“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” Lawrence Yun, NAR’s chief economist, said in as statement. “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”
Here were the main moves in markets, as of 9:35 a.m. ET:
S&P 500 (^GSPC): +16.01 points (+0.49%) to 3,297.07
Dow (^DJI): +63.59 points (+0.23%) to 27,211.29
Nasdaq (^IXIC): +53.54 points (+0.49%) to 10,831.33
Crude (CL=F): +$0.39 (+0.99%) to $39.70 a barrel
Gold (GC=F): +9.70 (+0.51%) to $1,920.30 per ounce
10-year Treasury (^TNX): -0.5 bps to yield 0.666%
UK Prime Minister Boris Johnson on Tuesday announced new restrictions on business operations in the country as it and others in Europe struggle to contain a resurgence in coronavirus cases. In a speech Tuesday evening in the UK, Johnson said the country had hit a “perilous turning point” over Covid-19, as cases there and in nearby Spain and France continued to rise.
The new measures include an early 10 p.m. closure mandate for restaurants and pubs. Johnson also encouraged individuals to work from home as much as possible and imposed a mandatory face covering policy for those traveling in taxis and working in hospitality.
Here were the main moves in markets, as of 7:19 a.m. ET:
S&P 500 futures (ES=F): 3,279.00, up 4 points or 0.12%
Dow futures (YM=F): 27,028.00, down 27 points or 0.1%
Nasdaq futures (NQ=F): 11,040.25, up 51.25 points, or 0.47%
Crude (CL=F): +$0.63 (+1.6%) to $39.94 a barrel
Gold (GC=F): +$1.50 (+0.08%) to $1,912.10 per ounce
10-year Treasury (^TNX): +0.5 bps to yield 0.676%
Here were the main moves in equity markets, as of 6:14 p.m. ET Monday:
S&P 500 futures (ES=F): 3,273.00, down 2 points or 0.06%
Dow futures (YM=F): 27,035.00, down 20 points or 0.07%
Nasdaq futures (NQ=F): 10,969.75 down 19.25 points, or 0.18%
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Author: Emily McCormick·ReporterSeptember 22, 2020, 10:06 PM