Financial market research and analysis

The US dollar rebounded at the open. The greenback gained against all of its G10 counterparts, except the Canadian dollar, as Hurricane Irma weakened after hitting Florida over the weekend. The actual damages caused by the hurricane could finally be less than $50bn versus $192bn estimated prior to the hit. The US insurers could take a breather on Monday.

The Dow Jones mini futures (+111.00 points), the S&P500 mini futures (+10.75 points) and the Nasdaq 100 mini futures (+32.50 points) hint at a positive weekly open in the US. Apple will release the new iPhone on Tuesday. Apple shares were hit by the global risk-off environment and traded lower for five consecutive sessions to $158.53. We could expect price volatility in Apple shares at the time of the release, as it has been the case in the past. The expectations are high. If the company fails to meet the expectations at its 10th anniversary, the disappointment could shake up its market price. According to the latest Bloomberg survey, 79% of analysts have a positive outlook for Apple shares, 20.9% are on hold with an average 12-month target price of $175.46. There are no sell recommendations.

Asian markets started the week risk-on as North Korea stayed quite over the weekend and contented with a celebration party for the nuclear test. There is still no consensus on the UN sanctions. China and Russia are opposed to oil embargo.

Mining stocks (-1.10%) were the losers of the day in Sydney, as the industrial metals traded in the red due to the broad-based USD rebound.

The FTSE opened on a positive note. In addition to the risk-on inflows, a softer pound could also encourage purchases in FTSE stocks. Gold miners led losses in London. Randgold Resources (-1.66%) and Fresnillo (-1.67%) were sold off as gold erased 0.87% in improved risk environment. The rest of the mining sector remains under pressure due to lower commodity prices.

It could be time for a downside correction in GBPUSD. The pair advanced to 1.3224 on last week’s aggressive USD sell-off. Given that investors are returning to the greenback, the pound could be on the chopping block, with the inflation and employment data and the Bank of England (BoE) decision on the menu of the week. Technical support is eyed at 1.3117 (minor 23.6% retrace on August 24 – September 8 rise) before 1.3052 (major 38.2% retrace), which should distinguish between a short-term bearish reversal and the continuation of the positive trend started on August 24.


European stocks gain as euro, core Eurozone bonds slide

The EURUSD opened the week flat-to-slightly-negative. The net speculative euro long futures positions extended to new multi-year high as last week’s European Central Bank (ECB) meeting left investors with hope, although the ECB held fire and refrained from giving significant details regarding the future of its Quantitative Easing (QE) program.

The risk-on is driving the capital from Eurozone’s core sovereign bonds to stocks. The European bank stocks rallied more than 1% at the open. Improved rates could also temper the euro depreciation against the broadly stronger US dollar. The DAX is preparing to test the 100-day moving average (12’450).


Yen, gold give back safe-haven gains

Nikkei (+1.41%) and Topix (+1.17%) gained in Tokyo. The USDJPY edged higher as the Japanese core machinery orders surged by 0.8% on month to July (versus 4.1% expected and -1.9% last).

Better risk appetite drives the capital out of safe-haven assets. The daily trend and momentum indicators are negative in USDJPY and the first resistance could be found at 109.00 (minor 23.6% retracement on July – September fall). The key resistance is eyed at 110.05 (major 38.2% retrace and 50-day moving average). Large put option expiries stand at 109.10 and 108.50 today. There are no option barriers into the 110.00 mark. Instead, call option trail above 110.15 and could lend support to an eventual recovery past 110.00.

Gold opened below its 100-hour moving average ($1’340) and could possibly pullback to $1’328 (200-hour moving average) and $1’322 (minor 23.6% retrace on Jul – August rally) as investors opt for more risk this Monday.


Yuan depreciates as PBoC changes regulation on FX forwards

Chinese stocks gained and the yuan weakened. The latest inflation figures showed a solid rebound in both consumer and factory-gate prices in August. The Chinese consumer inflation increased to 1.8% year-on-year in August from 1.4% printed a month earlier; as the producer prices surged to 6.3% year-on-year from 5.5% a month earlier, surprising analysts who expected 5.7% rise. The solid inflation report did not reflect positively in yuan’s value. In contrary, the Chinese yuan weakened both onshore and offshore as the People’s Bank of China (PBoC) increased the reference rate by less than expected and removed the reserve requirements for FX trading, which should slowdown the yuan appreciation moving forward. In the long-run, softer capital controls could strengthen the investor sentiment and give support to the Chinese financial system.


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