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Today’s FX chart analysis - video

Saxo Bank’s head of FX strategy John Hardy takes a closer look at trends and moves in today’s forex charts, including EURUSD, USDJPY, AUDUSD, and EURSEK.

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Article / 12 July 2017 at 2:14 GMT

Morning Report APAC: US dollar hit by Trump Jr email chain

Saxo APAC SalesTrading

APAC Sales Trading Desk / Saxo Capital Markets

Singapore

Donald Trump Jr may have provided evidence of collusion with Russia
USD fell 0.2% against the yen after the Trump Jr email release
The market prices in 93% chance of a Bank of Canada rate hike
Base metals were higher on a weaker USD; iron ore claimed $65 overnight
Crude oil extended gains

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)

Speeches

2030 – US – Federal Reserve releases Chair Janet Yellen’s testimony to Congress

2200 – US – Yellen to appear before US house panel

2315 – CA – Bank of Canada’s Stephen Poloz and Carolyn Wilkins at Ottawa press conference

0215 – US – Fed’s Esther George speaks in Denver on the economic outlook

Overnight news

US: Wholesale inventories grew 0.4% month-on-month, from 0.3%. Inventory investment is still likely weighing on economic growth in the second quarter. Auto inventories jumped 0.7% in May after declining 1.4% in April amid declining sales. Inventories had contributed to GDP growth for two straight quarters. They have remained lean this year, with businesses cautious amid sluggish domestic demand.

Washington: Donald Trump Jr. may have just given Robert Mueller “smoking gun” evidence signaling his father’s presidential campaign colluded with the Russian government to win the 2016 election, according to POLITICO, referencing veteran prosecutors and white-collar defense attorneys experienced in Washington scandals. The president’s oldest son — in a surprise Tuesday tweet — shared what he said was a full email chain from June 2016 detailing his plans to set up a meeting with a Russian government lawyer who was willing to share damaging material about Hillary Clinton.

The smoking gun, according to the attorneys, is the wording throughout the emails that Trump Jr exchanges with a broker for one of his father’s former Russian business partners. At one point, Trump Jr responds “love it” at the prospect of material that would “incriminate” Clinton. In addition, the source of the material says the offer of the material is “part of Russia and its government’s support for Mr Trump.”

Foreign exchange

USD came off following the drop in the US equity market and the Donald Trump Jr email saga (see above). The Dow ended up recovering most of its losses but the USD remained well offered with EURUSD getting very close to major resistance at 1.1500.

The level to watch is still 115.00 in USDJPY as the main resistance. If 113.68 goes, then it should trigger more pain given the market has been buying over the past few days.

In USDCAD, the market prices a 93% chance of a rate hike tonight, and one more hike until the end of the year. However, as of this morning, eight out of 33 banks/economists are calling for a hold tonight. In FX it appears positioning is still skewed to short CAD as people view most already priced in and plan to "sell the fact". The market could run in all directions tonight.

Emerging Markets: USDEM followed the G10 market with some USD offering interests but it was fairly mild considering that the market is more worried about the equity selloff that occurred in the Dow overnight before the rally back.

Foreign exchange movement

The market is short short-term volatilities in EUR on the topside and the faster we get to 1.1500, the more they will get short.

Some funds have been buying some AUD puts in large size, selling the calls for the 6M to 1-year area.

The Bank of Canada event tonight is priced in at 90% break even.

Rates

US yields eased, as relatively dovish comments from the Fed's Lael Brainard helped to hold up the drop on Trump Jr’s email release raising concerns on political stability. The curve was steepened, led by 3-year belly, amid strong 3-year auction.

Bunds had a choppy session overnight with light volume. Peripherals, especially Italy and Spain, underperformed with spreads widened.

Commodities

Equities

US stocks remained steady as Nasdaq extending its winning streak to a third session despite some political developments relating to Donald Trump Jr dominating the news cycle.

Amicus Therapeutics Inc. soared 26% in heavy trading after the Food and Drug Administration cleared the company to submit a new drug application for its Fabry disease treatment.

Halcon Resources Corp. surged 51% after it agreed to sell its Williston Basin assets to a unit of Bruin E&P Partners for $1.4 bn in cash.

European stocks finished with losses as investors tread cautiously ahead of US Federal Reserve Chairwoman Janet Yellen’s testimony to Congress.

Pearson PLC, the biggest loser on Stoxx600, slumped 5.1% after the British education and publishing company said it is selling a 22% stake in Penguin Random House for $1bn to its joint-venture partner, German media company Bertelsmann SE.

Marks & Spencer Group PLC declined 4.7% after reporting a 0.5% fall in UK like-for-like sales for the first quarter of fiscal 2018.

Asia Pacific stocks

Hong Kong

Analyst Ratings:

Cowell E Holdings (1415 HK): Cut to Hold at BNP Paribas, PT HK$3.10
China State Cons Int’l (3311 HK): Cut to Hold at China Securities
Fortune REIT (778 HK): New Buy at Haitong Intl, PT HK$12.70
Midea (000333 CH): Assumed Overweight at Morgan Stanley
Semiconductor Manufacturing (981 HK): Raised to Buy at Daiwa

Preview:

China Oilfield Services (2883 HK) Gets 1-Well Norway Contract From Lundin
China Resources Land Jan-June Contract Sales Rise 14% on Year
Dongfeng Motor (489 HK): PSA Imports of Chinese Gasoline Engines Is Temporary
Glencore (805 HK): Is Said to Draw Liberty House Bid for Australian Mine
Glencore (805 HK): European Miners Gain Second Day as Metals Rise on China Boost
Glencore (805 HK): Chad Names Rothschild, Cleary Gottlieb to Lead Oil-Loan Talks
HSBC (5 HK) CEO Gulliver Repeats Commitment for Paris Move Post Brexit
Legend Holdings (3396 HK) Is Said To Discuss BIL Stake Purchase: REUTERS
Meitu (1357 HK): Kingkey Enterprise Boosts Meitu Stake to 14.23% From 11.82%
China Suntien (956 HK) Expects 1H Net to Rise More Than 60% on Year
Sun Art (6808 HK) Names Ludovic Holinier CEO to Succeed Bruno Mercier
Sun Art (6808 HK) Sees ‘Significant’ Rise in 6-Month Profit vs Year Ago

Japan

Analyst Ratings:

Hochiki (6745 JP): Cut to neutral at Tokai Tokyo Securities, PT 1,940 yen
Mazda Motor (7261 JP), Toyota Motor (7203 JP): Cut to underperform at BofAML
Subaru (7270 JP): Raised to buy at Jefferies; cut to neutral plus at Mito Securities
Zeria Pharma (4559 JP): Cut to neutral at Tokai Tokyo Securities

Preview:

Bic Camera (3048): 9-month operating profit -9.2% y/y to 15.5bn yen, maintains full-year forecast at 23bn yen
Daito Pharmaceutical (4577): Full-year operating profit +7.8% y/y to 3.8bn yen; forecasts 4.1bn yen for current FY
FamilyMart UNY Holdings (8028): 1Q net income 7.7bn yen vs analyst est. 9.0bn yen, maintains full-year forecasts
Kitano Construction (1866): To buy back up to 5.6% of shares
Life Corp (8194): 1Q operating profit -24% y/y to 3bn yen, maintains full-year forecast at 12.6bn yen
Mitsubishi Gas Chemical (4182): To build 2 wafer cleaner plants in US, Nikkei reports
Saizeriya (7581): 9-month operating profit +35% y/y to 8bn yen, maintains full-year forecast at 11bn yen; to buy back up to 0.6% of shares
Sanei Architecture Planning (3228): 9-month operating profit +27% y/y to 4.8bn yen, maintains full-year forecast at 9.8bn yen
Sapporo (2501): 1H operating profit short of expectations, Nikkei says
Shionogi (4507): Merck wins German patent ruling over HIV drug
Takata (7312): Will recall an additional 2.7m airbag inflators in US
Takeuchi Manufacturing (6432): 1Q operating profit -13% y/y to 4.2bn yen, maintains full-year forecast at 11.7bn yen
TDK (6762): 1H operating profit likely to fall 20% to ~35bn, Nikkei says
Toshiba (6502): Sandisk granted temporary restraining order prohibiting Toshiba from preventing employees from accessing shared databases
Yamato Holdings (9064): Co. and JD.com to study comprehensive alliance

Australia

Analyst Ratings:

Incitec Pivot (IPL): Raised to Baa2 from Baa3 by Moody’s

Preview:

Downer EDI (DOW): Extends Spotless (SPO) offer to July 21, doesn’t have control
Industria REIT (IDR): 360 Capital Total Return Fund (TOT) sold stake for A$63.4m; Growthpoint Properties (GOZ) buys 18.2% stake for A$68.1m
Kidman Resources (KDR AU): To form JV with Chile’s SQM for Mt. Holland lithium project
South32 (S32): Declares force majeure on Illawarra coal, Platts reports
Tabcorp Holdings (TAH): Plans to oppose ACCC application, pursue expedited hearing

Donald Trump Jr may have just given Robert Mueller “smoking gun” evidence. Photo: Shutterstock

– Edited by Susan McDonald

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