Consolidation In Ranges As Markets Brace For Next Week

 | Jun 10, 2016 05:29AM ET

Market Brief

Asian equity markets declined for a second straight day as commodities fell on the back of lingering growth and fed policy. The reality of the magnitude of the UK referendum on EU membership and FOMC meeting is beginning to hit investors. We anticipate sentiment to remain weak and ranges to consolidate. Developed markets’ interest rates continue to dominate conversation as rates positioned lower on event fears. UK, German and Japanese 10-year bond yields fell to a historical low. 10yr JGB yields fell to -0.155% and investors now have to go out 20 years on Swiss government bonds to secure a positive return. The Nikkei and Hang Seng declined -0.60% while the Shanghai composite remained closed for the Dragon Boat festival. Notably, MSCI will decide on whether to include China’s A shares in the index on 15th June. The USD strengthened against most G10 and EM currencies, as the DXY rose to 94.21. The AUD/USD reversed yesterday’s gains from 0.7505 to 0.7407 as commodities sold off (despite reports that Chinese demand for crude is on the rise). USD/JPY held near the top of the 106.85 to 107.30 range on short covering, yet with Fed next week and Brexit fears high, traders are vigilant for a quick reversal. Finally, USD/SEK exhibited a strongly bullish, engulfing pattern on the daily charts, suggesting further upside. In emerging Asian markets, KRW and MYR led the decliners against the USD. Weakness in commodities was led by oil and metals as Brent declined to $51.61, despite solid demand and supply disruption worries, potentially suggesting a $52.86 peak.