The dollar is steadily growing across the entire spectrum of the market. He is obliged by his vigorous start of the week, month and quarter to the referendum on independence in Catalonia, the light anti-risk attitude and low liquidity of the Asian market, where most sites are closed today due to national holidays. Regional stock indices (those that still work) show mixed dynamics, while oil and gold are becoming cheaper.
In Japan, the Topix index fell 0.1%, despite the weakening of the yen and the favorable results of the quarterly Tankan survey – judging by this report, for the largest manufacturing enterprises in the economy, the most favorable conditions for the last ten years have now developed. The automotive industry and energy companies are declining and are pulling the entire index. S & P / ASX 200 in Australia increased by 1.0% due to improved mood in the segment of mining companies, as well as through positive reports on business activity in the manufacturing sector. Markets in Hong Kong, China, South Korea and India are closed today, accordingly, nothing interesting happens there.
The dollar started the quarter successfully
In the foreign exchange market, bullish sentiment is dominated by the dollar, while the leaders of the fall against the US currency are the euro, which clearly does not like the results of the referendum on independence in Catalonia, and the yen that gives up positions for no apparent reason, except for the traditional globally growing profitability in particular, the yield on 10-year US government bonds in the morning rose by two basis points, and for similar Japanese securities – fell by as much) and expectations for rates in the US. The data on personal incomes and expenditures published on Friday coincided with expectations. Ms. Yellen was definitely right, speaking very cautiously about the dynamics of inflation, since, judging by the latest data, she will grow slowly and reluctantly in the near future. Nevertheless, investors continue to pawn in the price now almost inevitable rate hike in December, and count on the stimulating effect of Trump’s tax plan. Although his fate is vague, and the effect is potentially far from expected.
Catalonia has poured a euro pig
The euro / dollar has lost 0.44% since morning and is now trading at 1.1765, while the bearish sentiment is clearly increasing towards the opening of the European session. Separatism in the third largest economy of the Eurozone is the last thing Europe needs now that has not yet fully recovered after the elections in Germany, where ultra-right nationalists received unexpectedly large support and seats in parliament. Local support in the euro / dollar pair is at the level of 1.1730, followed by 1.1700 and the August low in the 1.1662 area. The break below will be the final chord of the medium-term uptrend and, possibly, the beginning of a deep correction in the area 1.14. To stop this destructive trend, you need at least two things: (1) the fall of the dollar across the entire spectrum of the market – a stable and deep; (2) strong comments from ECB members that unambiguously indicate the impending curtailment of incentives and, in general, the intention to normalize monetary policy. This week there are many representatives of the ECB, perhaps they will say something life-affirming.
In the macroeconomic calendar today traditional for the beginning of the month reports on PMI indices in the manufacturing sector. In fact, we have already seen preliminary data and are unlikely to change much today, in the final version. In general, business activity in the Eurozone is growing, confirming the theory of economic recovery. Well, but not enough to induce the ECB to take more decisive action.
Yen only interested in rates
The dollar / yen aimed at the high of the previous week in the area of 113.25. This is the nearest target for bears by the yen – quite achievable in the short term on the wave of strengthening the dollar. However, further weakening of the Japanese currency will require efforts and additional incentives. Over the past two months, the yen has fallen in price against the dollar by almost 2.5% – in early August, the dollar / yen tested the lows in the 107.32 area, and is now approaching 113.00. The reason is one: multidirectional monetary policy in the US and Japan. While nothing will change here, the dollar / yen will not be able to develop a confident downward correction, despite the fact that, technically, the short-term uptrend in the pair is losing power. Local support is at 112.40, followed by 112.00 and 111.70.
It’s time to change the rub.
The ruble gained ground on Friday, especially against the dollar: the currency returned to the lower limit of the range we indicated in the area of 57.50. The Euro / ruble descended into the area below 68.00, but did not manage to move much deeper into the new range. Oil prices and the tax period no longer support the ruble. In addition, the rising dynamics of the dollar on the world market also hints that today luck may turn away from the Russian currency. Given the fundamental background and technical factors, it can be assumed that this week the ruble will take a little bit within the formed ranges. Today, at the MICEX pre-market, the dollar / ruble is consolidating with a rising trend after a short-term fall in the 57.19 area on a low liquid market. The Euro / ruble is falling under the influence of the downward dynamics of the single currency on the international market.