Asian markets started with mild risk aversion today, but feelings stabilized quickly. The Australian dollar is being squeezed after China bans four of its slaughterhouses, but there is no follow-through sale thereafter. While Australia remains soft, it generally holds above yesterday’s low at the moment. The Canadian dollar is the second weakest, while the Yen is the strongest. After all, big crosses and pairs trade within yesterday’s reach.
Technically, the USD / JPY breach of 107.49 resistance suggests that the correction fall from 111.71 has ended. Further increase will now favor 109.38 resistance first. 133.17 less resistance in GBP / JPY will be a focus and breakage will further indicate Yen’s weakness. GBP / JPY would then target 135.74 resistance. The AUD / USD’s retreat this week has been pretty low so far. Attention will be paid to the direction of the outbreak through 0.6569 resistance or 0.6372 support.
In Asia, Nikkei closed slightly with -0.12%. Hong Kong HSI has fallen -1.36%. China Shanghai SSE is down -0.17%. Singapore Strait Times is down -0.97%. Japan’s 10-year JGB yield is down -0.0167 to -0.006. Overnight, DOW fell -0.45%. The S&P 500 rose 0.02%. NASDAQ is extending its recent strong rally, rising 0.78%. 10-year yield increased 0.044 to 0.726.
Trump rejects renegotiation of trade agreements with China
US President Donald Trump openly rejected the idea of renegotiating the trade agreement with China. The comment came after reports that some Beijing advisers were pushing to reopen the signed agreement. When asked if he would rework the first trade step, Trump said: “No, not at all. Not even a little. I’m not interested. We signed an agreement. I had also heard that they would like to open the trade talk to make it a better deal for them. “
The Chinese state-controlled hawkish tabloid global time reported that malicious attacks by the United States have ignited a “tsunami of anger” among Chinese trade insiders. A trade adviser told the government “it is actually in China’s interest to finalize the current Phase 1 agreement”. And “U.S. can’t afford to restart the trade war with China if all goes back to the starting point. “
It is noted that China could invoke a clause to trigger renegotiation “in the event of a natural disaster or other unpredictable event”. But Trump insisted that “if that happens, we will make a resignation and we will do what I can do better than anyone else.”
China bans four Australian slaughterhouses as tensions rise
China-Australia trade tensions continued to escalate. Four Australian red meat slaughterhouses were banned from importing into China. It comes just days after China warned of the plan to impose 80% tariffs on Australian barley. Minister of Commerce Simon Birmingham tried to downplay the suspension as just some “technical issues”. He added, “There are many other meat processing facilities that will continue under their approved permits to ship a product to China, which they do, in fact, around the rest of the world.”
But some analysts believed China’s moves are retaliation against the Australian government’s push for independent investigation into the coronavirus pandemic that started in Wuhan. Chinese Ambassador to Australia, Jingye Cheng, warned last month that the Chinese public may be boycotting Australia products under pressure for coronavirus research. In an Australian financial review in April, Cheng said, “maybe even the common people will say, why should we drink Australian wine or eat Australian beef?”.
Australia’s NAB business ratio dropped to -34, a broad deterioration across industries
Australia NAB Business Confidence rose to -46 in April, up from -65. But it remains well under the recession of the 1990s. However, business conditions fell to -34, down from -22, below the level seen in the financial crisis 08/09. Looking at some details, trading conditions dropped from -19 to -33. Profitability conditions fell from -28 to -35. Terms of employment also fell from -20 to -35. Forward orders fell from -28 to -36, suggesting that activity is likely to be further weakened in the short term.
Alan Oster, NAB Group Chief Economist ‘confidence experienced a rebound in the month following the sharp fall last month, but this gives little consolation as it remains about twice as weak as the 1990s recession. Business conditions fell further this month with a broad deterioration across industries ”.
“We see growth in growth late in the year, but even though it may be a solid bounce, production levels are not expected to return to COVID levels until early 2022. We expect unemployment to match this pattern, which will fall in 2021 but remain above 7%. All of this points to the required ongoing political support for some time, ”Oster said.
BoJ Kuroda: The short-term focus is to equalize corporate finance and stabilize markets
In the bi-annual testimony to Parliament, BoJ Governor Haruhiko Kuroda warned that “Japan’s economy is in an increasingly difficult state”. Outlook will “remain serious at the moment.” He promised to “do what we can as a central bank and work closely with the government.”
In the short term, the focus on monetary policy is to “smooth the company’s financing and stabilize the markets”. Although there is no huge risk of sharp credit declines as domestic financial institutions have sufficient capital buffers.
As for the steps to further ease the monetary, he said, “we are ready to take sufficient steps that are deemed necessary at that time”. The measures may include the expansion of asset purchases, the increase of market operating tools or the further reduction of interest rates.
The Chinese CPI fell to 3.3% yy in April, down from 4.3% yy, missing the 3.7% yy expectation. PPI fell -3.1% yyyy, down from -1.5% yyyy, missing out on expectations of -2.6% yyyy. The US CPI will be the main focus today. Attention will also be paid to scheduled submissions by some Fed officials, including Harker, Quarles and Master.
Daily AUD / USD report
Daily pivots: (S1) 0.66445; (P) 0.6503; (R1) 0.66549; More …
AUD / USD remains in the range 0.6372 / 6569 and intraday bias remains neutral first. Upside, 0.6569 will extend the rebound from 0.5506 and target 0.6670 key resistance. On the downside, fractures of 0.6372 support should confirm short-term reversal and bring a deeper decline to the 38.2% retracement of 0.5506 to 0.66569 at 0.6163 first.
In the bigger picture, there is still no clear sign of trend reversal. The major downtrend from 1.1079 (2011 high) is still to be extended. 61.8% forecast from 1.1079 to 0.6826 from 0.8135 at 0.5507 is already met. Persistent break that paves the way to 0.4773 (2001 low). On the flip side, however, the persistent break of 0.6607 would indicate a medium-term decline, turning the focus to 0.7031 resistance next.
Updating economic indicators
|01:30||AUD||NAB Business Confidence Apr.||-46||-66|
|01:30||AUD||NAB terms and conditions Apr.||-34||-21|
|01:30||CNY||CPI Y / Y Apr||3.30%||3.70%||4.30%|
|01:30||CNY||PPI Y / Y Apr||-3.10%||-2.60%||-1.50%|
|05:00||JPY||Leading Economic Index Mar P||84.3||91.7|
|10:00||USD||NFIB Business Optimism Index Apr||86.7||96.4|
|half past one||USD||CPI M / M Apr||-0.70%||-0.40%|
|half past one||USD||CPI Y / Y Apr||0.80%||1.50%|
|half past one||USD||CPI Core M / M Apr.||-0.20%||-0.10%|
|half past one||USD||CPI Core Y / Y Apr||1.70%||2.10%|