Difficult FX Trading Conditions

Stephen Innes SPI Asset Management

The dollar is on a slightly better footing in early trade as the as North Korea( NK) headline risk has cooled a bit from last week’s fevered pitch. With little lack of geopolitical headline escalation over the weekend, traders are nimbly unwinding some NK over hedges in early trade but are still on headline watch.

The weekend headlines have centred on Hurrican Irma as the world’s thoughts and prayers are for the residenters of Florida who are taking a battering from this beast.

Most certainly the swath of devastation both Harvey and Irma have left in their wake will give the Feds cause to pause, however, the rebuilding and recovery will be a massive boost to US growth. Chalk up another issue in the ever expanding Fed Conundrum check list.

Oil prices spilt lower Friday as Florida is the fourth biggest OIL consumer and demand will be muted over the short term

Bloomberg reported that the PBOC would remove reserve requirements on Yuan forwards. Scraping this requirement put in place in October 2015 to curb FX speculation suggests a more liberalised approach to Yuan trading as the PBOC removes some of the defensive mechanism implemented to reduce capital outflow

All in all holding any long term currency position these days remains challenging.

The Chinese Yuan

There was an extraordinary move on USDCNH Friday when the pair dropped from 6.4950to 6.45 level in the blink of an eye. Outside of NK headline risk, the CNH was the real story of last week as on Friday there was record intraday appreciation from the midpoint (smashing the record set on Monday). Other than the weaker USD and lower for longer Fed narrative, there may be some repatriation flows occurring back to the mainland along with the CNH gaining some haven appeal all adding to the bullish sentiment. Although the market is trading above 6.50 USDCNH this morning pre fix, traders will be watching for any push back for the Pboc on the currency strength However the recent currency moves indicate investors optimistic near to view on all things China

Japanese Yen

Led by a collapse in US yields, and Usd Asia was selling off UsdJpy y gave way through 108.00. Nikkei, the worst performer of the Asian indices adding to the woes. With little sabre rattling over North Korean foundation day this weekend, USDJPY has recovered above 108.00, but trader remains very cautious.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.