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Political crisis deepens Ringgit rout
07 August 2015, 13:40
Malaysian Ringgit is facing relentless rout as investors' pulls money out of
the country ahead of a rate hike from US Federal Reserve. Moreover current
political crisis has provided the acceleration to it.
Even with low movement today, Dollar has gained more than 0.2% against Ringgit. Dollar is currently trading at 3.9165 against Malaysian Ringgit, up 13.5% so far this year and around 22% in last 12 months.
Global slump in commodity prices especially oil, which accounts for 30% of the revenue. Now political crisis is making it worse for Ringgit.
Corruption at state investment fund, 1MDB has already created enough of a firestorm for the current government and to add to the mix Malaysia's anti-corruption agency has found $675 million donated to Prime Minister Najib Razak's personal account.
Though it is too early to say, but current crisis might lead to full blown political crisis, with Prime Minister stepping down his authority.
With political crisis and oil rout, there are little or no respite for Malaysian Ringgit.
Even with low movement today, Dollar has gained more than 0.2% against Ringgit. Dollar is currently trading at 3.9165 against Malaysian Ringgit, up 13.5% so far this year and around 22% in last 12 months.
Global slump in commodity prices especially oil, which accounts for 30% of the revenue. Now political crisis is making it worse for Ringgit.
Corruption at state investment fund, 1MDB has already created enough of a firestorm for the current government and to add to the mix Malaysia's anti-corruption agency has found $675 million donated to Prime Minister Najib Razak's personal account.
Though it is too early to say, but current crisis might lead to full blown political crisis, with Prime Minister stepping down his authority.
With political crisis and oil rout, there are little or no respite for Malaysian Ringgit.
07 August 2015, 13:37
CHINA CENTRAL BANK: CONSUMER INFLATION STABLE AT LOW LEVEL
07 August 2015, 13:31
CHINA CENTRAL BANK: WILL NOT RELY ON STRONG POLICY STIMULUS TO BOOST ECONOMIC
GROWTH IN MEDIUM TERM
07 August 2015, 13:30
CHINA CENTRAL BANK: CHINA ECONOMY TO FACE FURTHER DOWNWARD PRESSURE IN NEAR
TERM DUE TO REFORMS
USD/JPY has broken handle high of 124.50 and jumped till 125. Intraday trend is bullish as long as support 124.50 holds.
Any break below 124.40 will drag the pair further down till 123.78/123.50 in short term.
On the higher side any break above 125 will target 125.85 in short term.
It is good to buy at dips around 124.40 with SL around 123.95 for the TP of 125.85.
FxWirePro: USD/JPY faces strong resistance around 125, good to buy at dips
07 August 2015, 13:30
- RES 4: 127.93 (161.8% retracement of 125.85 and 120.40)
- RES 3: 126.88 (161.8% retracement of 124.43 and 120.45)
- RES 2 : 125.85 (jun 5th high)
- RES 1:125
- SUP1 : 124.75 (7 day 4 HEMA)
- SUP2 :124.50 (resistance turned into support)
- SUP 3 : 123.78 ( Aug 4th low)
- SUP 4 :123.50 (Jul 31st low)
USD/JPY has broken handle high of 124.50 and jumped till 125. Intraday trend is bullish as long as support 124.50 holds.
Any break below 124.40 will drag the pair further down till 123.78/123.50 in short term.
On the higher side any break above 125 will target 125.85 in short term.
It is good to buy at dips around 124.40 with SL around 123.95 for the TP of 125.85.
RUB to weaker due to fall in current account surplus
07 August 2015, 13:27
Strong dividend payouts by Russian corporate will likely keep pressure on the
RUB in the next 1-2 months by supporting meaningful capital outflows to offshore
dividend recipients.
Dividends constitute a large part of the negative seasonality in the Russian current account. In addition to the seasonal recovery in imports from the January-February slump, dividend flows in June-August strongly contribute to the seasonal widening of the income balance, which is the key driver of deterioration in the current account surplus.
According to Bank of America, current account surplus is the key fundamental factor of RUB stability and strength, such weakness will likely keep RUB on the weaker side of its tentative RUB52/USD to RUB58/USD trading range.
Bank of America says "We keep our current RUB55/USD forecast unchanged for now. Despite the likely short-term pressure from capital outflows and forced EXD deleveraging, the RUB could start receiving support from the likely reversal of massive FX positions in Russia. As a result, Russia has been buying FX since 3Q13 and throughout 2014."
Dividends constitute a large part of the negative seasonality in the Russian current account. In addition to the seasonal recovery in imports from the January-February slump, dividend flows in June-August strongly contribute to the seasonal widening of the income balance, which is the key driver of deterioration in the current account surplus.
According to Bank of America, current account surplus is the key fundamental factor of RUB stability and strength, such weakness will likely keep RUB on the weaker side of its tentative RUB52/USD to RUB58/USD trading range.
Bank of America says "We keep our current RUB55/USD forecast unchanged for now. Despite the likely short-term pressure from capital outflows and forced EXD deleveraging, the RUB could start receiving support from the likely reversal of massive FX positions in Russia. As a result, Russia has been buying FX since 3Q13 and throughout 2014."
07 August 2015, 12:47
INDONESIA'S FOREX RESERVES WERE $107.55 BLN AT END-JULY, VS $108.03 BLN AT
END-JUNE - C.BANK
07 August 2015, 12:47
INDONESIA JUL FOREX RESERVES* DECREASE TO 107.55 BLN $ VS PREV 108.030 BLN $
FxWirepPro: USD/CHF to perceive HY vols; optimize volatility through gamma spreads
07 August 2015, 12:46
We've been formulating a lot of call spreads on highly volatile currency
pairs (USDCHF is the one among the pool, the pair ranks under top three highest
among major pairs to perceive volatility of ATM contracts, ATM contracts
currently trending at 11% vols) and have been drawing up some customized
strategies by using P&L tools and techniques to look at the option
Greeks.
While doing so it seems like the OTC option of this pairs have tons of Gamma. It might be puzzling because on one hand it seems some of these options are highly volatile than any other Euro American currency pairs except EUR/USD but a tiny shift in the underlying exchange rate would cause instant disaster. This can be arrested by devoting little time on ascertaining an accurate gamma.
We've constructed call spread by considering gamma closer to zero would neutralize the implied volatility impact on option price and this position remains quite firm to achieve our hedging objectives, because we know gamma represents the change in delta, we have healthier delta at 0.46 at combined position.
This results in desired hedging objective irrespective implied volatility disruptions as we've OTM shorts on side and prevailing bull run will be taken by In-The-Money calls.
R1: 1.5552 (Daily Kijun Line)
R2: 1.5596 (200-HMA)
R3: 1.5638 (Daily High Aug 6)
Support Levels:
S1: 1.5511 (Daily Tenkan Line)
S2: 1.5465 (Daily Low Aug 6)
S3: 1.5445 (Daily Cloud Base)
While doing so it seems like the OTC option of this pairs have tons of Gamma. It might be puzzling because on one hand it seems some of these options are highly volatile than any other Euro American currency pairs except EUR/USD but a tiny shift in the underlying exchange rate would cause instant disaster. This can be arrested by devoting little time on ascertaining an accurate gamma.
We've constructed call spread by considering gamma closer to zero would neutralize the implied volatility impact on option price and this position remains quite firm to achieve our hedging objectives, because we know gamma represents the change in delta, we have healthier delta at 0.46 at combined position.
This results in desired hedging objective irrespective implied volatility disruptions as we've OTM shorts on side and prevailing bull run will be taken by In-The-Money calls.
FxWirePro: GBP/USD holds above 1.55 handle after UK trade deficit data
07 August 2015, 12:45
- UK June goods trade deficit came in at GBP 9.184 billion, beat forecasts at
GBP 9.30 billion, but widened from GBP 8.00 billion in May
- Sterling indifferent on UK releases, GBP/USD trades above the 1.5500 handle,
stuck in the 1.5515/20 band do far
- BOE minutes and the inflation report released on Thursday pushed back
rate-hike bets this year, dampening sentiment around the GBP
- Pair moves deeper into the daily cloud, outlook remains
bearish
- Currently the pair is trading at 1.5518, close to supports at 1.5511 (Daily
Tenkan Line), breaks below would open the door to 1.5465 (Daily Low Aug 6) and
then 1.5445 (Daily Cloud Base)
- On the upside, the initial hurdle lines up at 1.5552 (Daily Kijun Line)
ahead of 1.5596 (200-HMA)
R1: 1.5552 (Daily Kijun Line)
R2: 1.5596 (200-HMA)
R3: 1.5638 (Daily High Aug 6)
Support Levels:
S1: 1.5511 (Daily Tenkan Line)
S2: 1.5465 (Daily Low Aug 6)
S3: 1.5445 (Daily Cloud Base)
Guide to today’s important data and events
07 August 2015, 12:39
Lot of economic releases scheduled for today, some with high risk
associated.
Data released so far -
Data released so far -
- Australia - Home loans grew 4.4% while investment lending foe homes dropped by -0.7% in June.
- Japan - Bank of Japan (BOJ) held monetary policy steady.
- Switzerland - Unemployment rate stayed flat in July at 3.3%. Forex reserve rose to 531 billion in July from 516 billion in June.
- Germany - Industrial production dropped by -1.4% in June. Trade balance came at € 24 billion in June. Exports dropped by -1%, while imports dropped -0.5%.
- France - Industrial output dropped by -0.1%, and trade balance for June came at €-2.7 billion.
- Spain - Industrial output rose by 4.5% in June.
- UK - Trade balance came at -£ 1.6 billion.
- Greece - Prices dropped by -1.3% in July from -1.1% in June.
- India - RBI is scheduled to declare forex reserve at 11:30 GMT.
- US - Non-farm payroll report scheduled from US labor department at 12:30 GMT. Market is expecting job creation of 225,000 in July.
- Canada - Unemployment report scheduled at 12:30 GMT, followed by Ivey PMI at 14:00 GMT.
ARA gasoil stocks have risen to a record level this week
07 August 2015, 12:28
The OSPs for the US were left unchanged, on the other hand, while those for
Europe were actually lowered. Evidently the largest OPEC producer is still
sticking with its strategy of defending market shares, as can also be seen from
the latest production figures. The oversupply on the oil market is now also
affecting oil products, especially middle distillates.
According to PJK International, ARA gasoil stocks climbed by 185,000 tons this week to a record 3.368 million tons, notes Commerzbank. Distillate stocks have also risen sharply in recent weeks in the US, and meanwhile find themselves at a 3½-year high. For the time being, this should prevent the gasoil-Brent crack spread from widening, states Commerzbank.
R1: 0.9848 (Daily High Aug 6)
R2: 0.9862 (Daily High Apr 13)
R3: 0.9879 (76.4% of 1.0128-0.9072)
Support Levels:
S1: 0.9768 (Daily Low Aug 6)
S2: 0.9760 (Daily Low Aug 5)
S3: 0.9738 (100-HMA)
According to PJK International, ARA gasoil stocks climbed by 185,000 tons this week to a record 3.368 million tons, notes Commerzbank. Distillate stocks have also risen sharply in recent weeks in the US, and meanwhile find themselves at a 3½-year high. For the time being, this should prevent the gasoil-Brent crack spread from widening, states Commerzbank.
FxWirePro: CHF under pressure, risk of adjustment high on US payroll data
07 August 2015, 12:25
- USD/CHF continues to probe rising channel top, lack of daily close above
could see some pressure on downside
- Risk of adjustment on NFPs is high, should data boost CHF may weaken across
crosses
- Pressure rising on SNB to ease policy, evidence of SNB's increasing
intervention surfaces
- The pair is currently trading at 0.9829, with next hurdle at 0.9848 (Daily
High Aug 6) and supported at 0.9768 (Daily Low Aug 6)
R1: 0.9848 (Daily High Aug 6)
R2: 0.9862 (Daily High Apr 13)
R3: 0.9879 (76.4% of 1.0128-0.9072)
Support Levels:
S1: 0.9768 (Daily Low Aug 6)
S2: 0.9760 (Daily Low Aug 5)
S3: 0.9738 (100-HMA)
Saudi Arabia sells crude at premium to Asian customers
07 August 2015, 12:24
Oil prices posted new multi-month lows yesterday, Brent priced for a time at
below $49 per barrel - its lowest level since the end of January - and WTI
dropping to a 4½-month low of nearly $44 per barrel. Prices have recovered
slightly this morning, but lack the fundamental support that would be required
for any more pronounced and lasting recovery, says
Commerzbank.
Admittedly, Saudi Arabia has increased its official selling prices (OSP) for Asian customers, and in September will be charging a 40 US cents per barrel premium for Arab Light as compared with the Oman/Dubai benchmark. This is the first premium in a year. That said, a steeper price hike had been anticipated beforehand given the robust demand, adds Commerzbank.
Admittedly, Saudi Arabia has increased its official selling prices (OSP) for Asian customers, and in September will be charging a 40 US cents per barrel premium for Arab Light as compared with the Oman/Dubai benchmark. This is the first premium in a year. That said, a steeper price hike had been anticipated beforehand given the robust demand, adds Commerzbank.