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Asian Market Update – Friday: Dollar is Up as Central Bankers Get Ready For Big Event

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Janet Yellen Speech

The Big Question: Is the weakness seen in the dollar this year finally coming to an end?

The US dollar edged up in the early hours of the Asian trading session on Friday, extending a recent uptrend in the USD/JPY chart.

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The dollar gained some 0.10 percent against the Japanese yen before midday in Tokyo trading. All eyes are now on the Federal Reserve symposium in Jackson Hole, Wyoming, where Fed chair Janet Yellen is expected to deliver a speech at 1400 GMT time.

Yellen’s speech has a high potential impact on FX markets in particular and traders are advised to adjust their risk levels accordingly.

The question traders are asking themselves is if the weakness shown by the dollar will now end, or if this is just the start of a longer-term decline for the greenback.

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The initial optimism following Donald Trump’s election victory last year seems to be fading off, as his business-friendly agenda of tax cuts and deregulation may prove difficult to pass in Congress. With the President preoccupied with party infighting, Russia investigation, and “employee turnover” at the White House, traders are starting to realize that the initial prospects were too optimistic.

In the short term though, Yellen’s speech will determine the direction of the US dollar.

European Central Bank (ECB) President Mario Draghi is also participating at the Jackson Hole symposium and is expected to deliver his remarks at 1900 GMT. However, expectations for this speech are somewhat measured, as the ECB has made it very clear that there will be no change in policy until the next ECB meeting.

Still, it is worth noting that Mr. Draghi has previously used the conference as an opportunity to deliver critical, market-moving news.

Main Market Movers – Midday Asian Trading Session

Indexes Value at Midday Daily Change
Japan-Nikkei Stock Average 225 19,473 0.60%
China-Shanghai Composite Index 3,309 1.16%
Australia-ASX 200 5737 -0.06%

Major Asian indexes advanced Friday morning, holding on to their gains for the week and ignoring lower stock prices in the US the day before.

In Japan, the Nikkei 225 was up 0.60 percent, trading at 19,473, near the same level as the start of the week.

In China, the Shanghai Composite gained a good 1.16 percent to 3,309, ending the week on a strong note and breaking through the previous swing high from early August.

The Shanghai index is now at a high level, currently breaking through previous longer-term market tops. Some analysts believe the market is ripe for a reversal in trend in the coming days. However, if the index can push through these previous highs, it is a very bullish sign for Chinese Mainland shares.

Shanghai Composite IndexIn Australia, the benchmark ASX 200 opened the day lower, but then traded back to where the day started at around 5,737.

Currencies

The Japanese Yen is slightly down today versus the US dollar, with JPY/USD trading at 0.009124, down 0.04% for the day.

In Australian trading, the AUD/USD is unchanged for the day at 0.78982.

Commodities

WTI Oil was up 0.27 percent to $47.73, back at the same level where the price has consolidated in recent days.

Brent Crude also gained 0.58 percent to $52.41 per barrel.

Gold was up 0.10 percent to $1,286.56 an ounce.

Business News across Asia

In China, aluminum prices are expected to remain at high levels following a statement from the State Council saying that the country should continue cutting in the current oversupply of aluminum.

In Japan, the government released data showing that the core consumer-price index increased 0.5% in July compared with the same month the previous year, in line with expectations.

Take away: This provides some evidence that Japan is, at least temporarily, succeeding in its long battle against deflation.

Featured image from Wikimedia Commons.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 28 rated postsFredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity.




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Analysis

Rally Fades in Stocks as Apple Weighs on Nasdaq

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We warned yesterday that stock markets got vulnerable as the major US indices reached short-term overbought readings, and after a choppy Wednesday session, equities turned lower today in early trading. Apple fell by more than 2% in early trading on a supplier report regarding declining orders from the smartphone giant, and the sliding stock dragged the tech segment lower.

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S&P 500 Futures, 4-Hour Chart Analysis

While the short-term technical picture deteriorated, the losses are muted so far, and the rising short-term trendlines are holding up. Volatility ticked higher, with the VIX bouncing off its two-month lows, but the index is well below the levels seen in the beginning of the month, as Syria-related fears continued to ease and the Chinese-US trade spat also took the back seat in the mainstream media.

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DAX, 4-Hour Chart Analysis

Stocks finished broadly lower in Europe, while Asian equities reversed their early gains, with trading volumes still being low across the board. The economic calendar was almost empty today, with only the much worse than expected British retail sales figure adding to the string of negative surprises coming out form the UK this week. In the US, the Philly Fed index came in higher than expected, while weekly jobless claims were in line with expectations.

Dollar Stable as Short Yields Hit New Highs

2-Year Treasury Yields, 4-Hour Chart Analysis

Treasury yields resumed their rise in the quiet environment, and as the short end of the curve continues to outperform the flattening of the yield curve continues in earnest. While forex markets are still mostly flat, the Dollar is drifting higher against most of its peers in US trading.

AUD/USD, 4-Hour Chart Analysis

Commodity-related currencies are little changed, although both the Aussie and the Canadian Dollar are off their recent highs, and should they roll over, the bullish case would receive another hit.  Despite the weakening of the risk rally, crude oil continues to hit multi-year highs, with the WTI contract getting close to the $70 per dollar level today. Gold fell back below $1350, as the choppy consolidation pattern is still intact, and the slight risk-off shift wasn’t enough to trigger meaningful safe-haven flows.

Featured image from Shutterstock            

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 224 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Market Overview

Market Update: S&P 500 Notches Third Straight Rally on Earnings; Cryptocurrencies Hit $340 Billion

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U.S. stocks finished mostly higher on Wednesday, as earnings optimism lifted the S&P 500 Index and Nasdaq to their third consecutive daily advance. Meanwhile, cryptocurrencies resumed their uptrend after a two-day pause as bitcoin returned above $8,000 and bitcoin cash surged double-digits.

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Stocks Finish Mostly Higher

Two out of the three major U.S. indexes notched gains, with the S&P 500 Index edging up 0.1% to 2,708.64.

Four of 11 sectors contributed to the rally, with energy shares jumping 1.6%. Other commodity-sensitive sectors such as materials and industrials also reported firm gains.

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The biggest laggards on Monday included consumer staples and financials, which fell 0.9% and 0.4%, respectively.

The technology-laden Nasdaq Composite Index rose 0.2% to finish at 7,295.24.

Meanwhile, the Dow Jones Industrial Average fell 38.56 points, or 0.2%, to close at 24,748.07. The blue-chip index is coming off two straight sessions of 200-point gains.

A measure of implied volatility known as the CBOE VIX rose 2.3% to 15.60, which was still well below the historic average near 20. Volatility has been creeping lower in anticipation of strong quarterly earnings from U.S. firms.

The first round of Q1 reports have not disappointed, with major banks and technology companies reporting above-trend growth. Analysts at FactSet are forecasting the strongest quarter of year-over-year growth since 2011.

Cryptos Extend Rally

After initial hesitation, the cryptocurrency market rose on Wednesday as the end of tax season offered temporary reprieve to volatility.

The total market cap for all cryptos in circulation reached a high of $342 billion, according to CoinMarketCap. That was a gain of $19 billion on the day and the highest in almost a month.

Bitcoin cash (BCH) was the biggest gainer percentage-wise, climbing nearly 16% to $880 per coin on the major exchanges. Original bitcoin (BTC) advanced 3.4% to $8,190. However, its total share of the market fell below 41%.

Other major cryptocurrencies also contributed to the rally, with Ethereum adding 3.3% to $521 and Ripple XRP gaining 7.6% to settle at $0.71.

There was no immediate catalyst for the recovery, although tax relief may have played a role. The IRS extended its deadline for U.S. tax filing by one day after servers overloaded on deadline day.

Americans cryptocurrency holders may have owed as much as $25 billion in capital gains taxes, according to Tom Lee of Fundstrat Global Advisors. However, data from Credit Karma showed that less than 100 of its 250,000 filers have reported cryptocurrency-related capital gains.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 332 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Pre Market: Short-Covering Bounce Continues but Markets Look Vulnerable

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Stocks continued to drift higher gradually but relentlessly, as sentiment is still improving, quarterly earnings have been a tad better than expected so far, while the oversold momentum readings that developed in March are now erased.

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S&P 500 Futures, 4-Hour Chart Analysis

While we maintained a slight bullish bias amid the choppy consolidation, and the major US indices left the triangle patterns on the upside, the rally is far from being convincing, and we think that it’s time to look for entry points to trade the short side.

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Shanghai Composite, 4-Hour Chart Analysis

Trading volumes have been progressively declining as stocks rose, the momentum of the advance has also been suspicious, and Asian and European markets are still in much worse shape than their US peers, despite today’s early rally in most markets, with the Shanghai Composite actually breaching its February low just today, as we warned earlier this week.

As the easing of trade war fears was one of the main catalysts of the rally, the continued back-and-forth announcements between China and the US could rattle the weak trend, even as the escalation of the Syrian situation halted, for now. With the technicals now favoring a downswing, the market could be more vulnerable to negative news, so bulls should keep their stops tight here.

Another Calm day for Currencies as Commodities Jump

Gold Futures, 4-Hour Chart Analysis

Gold is showing surprising strength today, as although the Dollar is weak, safe-haven flows are still negative. Despite that, the precious metal is closing in on its crucial resistance zone near $1360 again, and given the lengthy consolidation phase, a breakout could setup a huge momentum move, especially if the current risk rally fades.

The oil rally also resumed after a brief correction, with the WTI contract reaching the $68 per barrel level for the first time since 2014 before today’s US inventory data. Although commodity currencies are stable, given the bullish backdrop, the performance of the Aussie and the Canadian Dollar is rather disappointing, and that also adds to our suspicions regarding the rally in equities.

The Great British Pound is the most active major fiat currency, but now the Pound is dropping following the miss in both producer and consumer prices, which cooled down rate hike expectations further together with yesterday’s lower than expected wage growth figure.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 224 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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