China Trade Data Comes In Mixed
Swissquote Bank Ltd | Jun 08, 2016 08:10AM ET
Market Brief
Risk appetite was mixed in the Asian session following a tepid US close and news the World Banks cut global growth forecast for the next three years. The Shanghai composite and Hang Seng are both trading lower at -0.29% and -0.25% respectively. The Chinese weakness can be attributed to the soft export data, calling in question recent evidence of stabilization. USD was marginally weaker against G10 and EM currencies but loses were well within recent ranges. USD/JPY bearish moment continued, after reversal off 107.92 high, declining to 106.72. The JPY was supported by good growth data that was revised higher. Japans 1Q GDP increased 0.5% q/q vs. 0.4% prior read. While Japan Q1 recorded a current account surplus of Y1.8785tln, against Y2.3189tln expected. Data also indicated that Japanese investors were net buyers of foreign securities by ¥2.7582trn. Commodities firmed, led by oil trading near is 10 month high as US crude stocks declined and by concerns about attacks on Nigeria's production, Brent crude reaching $51.5/bbl. The effect was mixed on commodity linked currencies as AUD continued to adjust to a less dovish RBA, yet CAD and NZD gained against the USD. AUD/USD bounded around the 0.7430 to 0.7467 range, yet upside looks capped by 65d MA at 0.7491. Finally, Hillary Clinton was declared the Democratic party’s nominee for US president with fresh primary wins.
China trade data disappointed as exports fell more than anticipated as external demand conditions remains weak. However, imports provided a bright spot beating expectations, indicated that potentially China growth machine was starting to grind. Chinas exports contracted 4.1% y/y in May against -4.0% expected. China’s import growth continued the positive trend contracting merely -0.4% y/y in May against -6.8% expected and -10.9% prior read. After a weak April, growth in major commodity imports rebounded. Overall, the data paints a mixed picture, with domestic continues improving while external environment remains soft and uncertain.
On the data front traders will be watching UK industrial productions which are expected to indicate further weakness in manufacturing. Domestic PMI data contracted below the 50 threshold in April, external demand remains subdued while the risk overhang of the referendum on EU membership have all contributed to the sectors continued weakness. Industrial production is expected come in flat from 0.3% m/m (-0.4% vs. -0.2% y/y). We anticipate Manufacturing production will decline -0.1% from 0.1% m/m. Ahead of the “Brexit” vote we don’t anticipate GBP/USD to break sideways range 1.4732 200d MA and 1.4353 100d MA. Elsewhere, we will see Switzerland inflation data, Canadian housing start and US JOLTs jobs opening.
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Currency Tech
EUR/USD
R 2: 1.1616
R 1: 1.1479
CURRENT: 1.1361
S 1: 1.1137
S 2: 1.1058
GBP/USD
R 2: 1.4969
R 1: 1.4770
CURRENT: 1.4515
S 1: 1.4300
S 2: 1.4132
USD/JPY
R 2: 109.14
R 1: 107.89
CURRENT: 107.53
S 1: 106.25
S 2: 105.55
USD/CHF
R 2: 0.9956
R 1: 0.9920
CURRENT: 0.9706
S 1: 0.9652
S 2: 0.9444
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