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15 September 2020

Upbeat Chinese data boosts mood, Boris’ bill passes first hurdle, Gold shines

Asian stocks and S&P500 500 futures are on the rise after China reported a 5.6% yearly increase in industrial output in August, while retail sales are up 0.5% YoY, also above estimates. The world’s second-largest economy also extended exemptions on some US goods imports, adding to the positive mood.

The US dollar is on the back foot, especially against the Australian dollar which is benefiting from Beijing’s data dump and relatively optimistic meeting minutes from the Reserve Bank of Australia.

Gold is on the rise, breaking out of range and hitting the highest since early September. Citibank says record pace of ETF investors demand, the weaker dollar and negative yields are also underpinning the precious metal.

GBP/USD is failing to benefit from the greenback’s decline. The House of Commons passed the controversial Internal Markets bill which violated the Brexit accord with the EU. Several members of Prime Minister Boris Johnson’s Conservative Party said they would vote against the legislation when it comes to a final read next week.

UK jobs figures are due out shortly, and they will likely show a modest uptick in unemployment. The fate of the furlough scheme and the Bank of England’s decision are awaited.

EUR/USD is on the rise, shrugging off rising COVID-19 cases in the old continent and benefiting from the European Central Bank’s lax approach to the exchange rate as expressed last week. The German ZEW Economic Sentiment is eyed.

USD/JPY is trading on low ground below 106, seemingly unaffected by the ascent of Yoshihide Suga to lead Japan. The outgoing prime minister’s right-hand man will assume office on Wednesday.

Oil prices are struggling to rise amid reports that OPEC+ countries are unlikely to deepen petrol production cuts.

Gold on its way to $1980, as US dollar lags

Having jumped 0.89% on Monday, gold is now closing on the next upside target at $1980, helped by broad-based US dollar weakness. The upbeat market mood on solid Chinese data downed the dollar.

USD/JPY could slip back to 105.20 – UOB

According to FX Strategists at UOB Group, USD/JPY could drop further and test the 105.20 region in the next weeks.

Key Quotes

24-hour view: “After trading in a quiet manner for several days, the sudden lurch lower in USD came as a surprise (overnight low of 105.53). The rapid drop appears to be running ahead of itself but with no sign of stabilization just yet, USD could breach the major support at 105.50. That said, it is left to be seen if it can maintain a foothold below this level (next support is at 105.20). Resistance is at 105.90 followed by 106.05.”

Next 1-3 weeks: “We have held the same view since last Monday (07 Sep, spot at 106.25) wherein USD ‘is likely in a consolidation phase and is expected to trade between 105.50 and 106.90 for a period of time’. After a week, USD is approaching the bottom of the range as it dropped to 105.53 yesterday (14 Sep). Downward momentum has improved considerably and from here, USD is expected to trade with a downward bias towards the next major support at 105.10. Overall, the negative bias in USD is deemed as intact as long as it does not move above the ‘strong resistance’ level at 106.30.”

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