Markets in holiday mood

Andrew Robinson MarketPulse

Equity markets mixed; Currencies positive

Holidays in both the UK and US later today ensured that activity in Asia was both low-volume and lackluster. Equity markets were generally trading in the red, with US indices based off futures prices drifting between 0.01% and 0.14% lower. China-linked equities fared worse, with the China50 index down 0.86% and the HongKong33 index down 0.51%.

Currencies displayed a slightly different picture, with the risk-beta currencies outperforming. AUD/USD gained 0.05% to 0.6932 while AUD/JPY rose 0.18% to 75.86. The first possible resistance point for AUD/USD could come in at 0.6945, which would be the 23.6% Fibonacci retracement of the April-May drop.

The yen was unwanted as safe haven hedges were unwound, with USD/JPY climbing 0.15% to 109.47, the first positive day in four sessions.

AUD/USD daily Chart

Source: OANDA fxTrade

China warns investors on the yuan

USD/CNH fell for a third consecutive day after one of China’s senior-most economic officials said that speculators who intended to go short the yuan will inevitably suffer from a huge loss. The comments came as US/CNH hit the highest level this year last week, nearing the key 7.0 level. The FX pair is now at 6.9063, down 0.62% from last week’s high.

On May 15 the PBOC launched another one of its CNH-denominated offshore bonds in Hong Kong, the third since November 2018 where it has auctioned 10 billion yuan in each of 3- and 12-month tenors at each offering. This exercise is aimed at draining liquidity from the offshore market, which would lead to higher market rates and thereby increase the cost of funding offshore yuan short positions.

USD/CNH Daily Chart

Source: OANDA fxTrade

Centerist parties lose ground in EU elections

Preliminary results show that Green and Liberal parties gained ground in the European parliamentary elections at the weekend, but the losses were not as dramatic as earlier polls had suggested. The BBC projections for the UK showed the Brexit party to win 29 seats, the Lib Dems 16 seats, Labour Party 10 seats, Green Party 7 seats, and the ruling Conservatives Party 4 seats. In Greece, PM Tsipras call a snap general election, probably for June 30, following the election results.

A blank data slate

The holidays have wiped out the data calendar for the major economies, so market direction will likely be driven by headlines on tweets on the significant events that are overhanging markets at the moment, namely the US-China trade negotiations, US-Japan trade negotiations, UK politics and the weekend European elections.

Author

Andrew Robinson

MarketPulse

A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentar

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.