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THE ASIA FX/RATES DAYBOOK: FX/RATES DAYBOOK ASIA: Tax Reform Hopes Extend Dollar’s Streak

(Bloomberg) — The dollar clinched its longest winning streak in more than a month after Republican leaders revived hopes for U.S. tax reform. Treasuries sold off for a fourth day. WHAT TO WATCH

  • Australia employment
  • China retail sales, industrial production
  • India wholesale prices

OVERNIGHT TRADING SESSIONS

  • Bloomberg dollar index rose 0.4% for a third day of gains; EUR/USD fell 0.7% to ~1.1885; USTs slipped; curve was mixed, steepening out to 10Y, while long end marginally outperformed
  • In the European session, the euro failed to breach 1.2000 as the Bloomberg dollar index fell by 0.1%; USTs rose slightly, with 10Y yield lower by less than 1bp at 2.162%

TOP OVERNIGHT NEWS

  • Trump administration officials and Republicans are promising a new framework in two weeks for legislation that would overhaul the U.S. tax code
  • Russia’s effort to influence U.S. voters through social media is a “red-hot” focus of special counsel Robert Mueller’s investigation into the 2016 election, according to U.S. officials familiar with the matter
  • Trump blocked a Chinese-backed investor from buying Lattice Semiconductor, a personal rebuke that bodes poorly for several other Chinese buyers seeking U.S. security clearance

KEY VIEWS

  • Bob Doll, the chief equity strategist at Nuveen Asset Management, said the sale by Austria of a century bond at a yield of 2.1% is a shock that highlights risks in fixed-income markets
  • Credit Agricole raises EUR/USD 3-month target to 1.22 from 1.19 and 12-month target to 1.25 from 1.22, based on ECB’s relaxed stance on currency strength and reduced rate expectations for the Fed
  • Scotia recommends buying CAD/JPY for potential gains towards 95.00 amid favorable technicals and fundamentals

DATA RELEASED OVERNIGHT

  • PPI rose 0.2% m/m (est. 0.3% rise) after 0.1% drop the previous month, and rose 2.4% y/y after 1.9% gain in prior 12-month period; reflects the jump in energy costs since January, while underlying inflation remained contained

ECONOMIC DATA (All times HK):

  • 7:50am: Sept. Japan Buying Foreign Bonds, prior ¥117.9b deficit
    • Sept. Japan Buying Foreign Stocks, prior ¥161.4b
    • Sept. Foreign Buying Japan Stocks, prior ¥158.3b deficit
    • Sept. Foreign Buying Japan Bonds, prior ¥1.36t
  • 9am: (New Zealand) Sept. ANZ Consumer Confidence MoM, prior 0.6%
    • Sept. Consumer Inflation Expectation, prior 4.2%
    • Sept. ANZ Consumer Confidence Index, prior 126.2
  • 9:30am: (Australia) Aug. Employment Change, est. 20,000, prior 27,900
    • Aug. Unemployment Rate, est. 5.6%, prior 5.6%
    • Aug. Full Time Employment Change, prior -20,300
    • Aug. Part Time Employment Change, prior 48,200
    • Aug. Participation Rate, est. 65.1%, prior 65.1%
  • 10am: (China) Aug. Retail Sales YoY, est. 10.5%, prior 10.4%
    • Aug. Retail Sales YTD YoY, est. 10.4%, prior 10.4%
    • Aug. Fixed Assets Ex Rural YTD YoY, est. 8.2%, prior 8.3%
    • Aug. Industrial Production YoY, est. 6.6%, prior 6.4%
    • Aug. Industrial Production YTD YoY, est. 6.8%, prior 6.8%
  • 12pm: (Japan) Aug. Tokyo Condominium Sales YoY, prior 3.3%
  • 12:30pm: (Japan) July Industrial Production MoM, prior -0.8%
    • July Industrial Production YoY, prior 4.7%
    • July Capacity Utilization MoM, prior 2.1%
  • 2:30pm: (India) Aug. Wholesale Prices YoY, est. 3.2%, prior 1.88%
  • 4:30pm: (Hong Kong) 2Q PPI YoY, prior 4.2%
    • 2Q Industrial Production YoY, prior 0.2%

CENTRAL BANKS (All times HK):

  • 7:15am: RBA’s Debelle Gives Remarks in Sydney

BOND SALES/PURCHASES (All times HK):

  • For corporate bonds, see New Issue Monitor
  • 10:05am: New Zealand Plans to Sell NZD100.0m 2.5% 2040 I/L Bonds
  • 11:35am: Japan to Sell 3-Month Bills
    • Japan to Sell 20-Year Bonds
  • 12pm: Malaysia to Sell MYR4.0b 5-Year Bonds

MARKETS as of ~4:40am IN HONG KONG

  • USD/JPY +0.4% to 110.56 (range 109.91-110.69)
  • EUR/USD -0.7% to 1.1885 (range 1.1873-1.1995)
  • AUD/USD -0.4% to 0.7985 (range 0.7971-0.8044)
  • NZD/USD -0.6% to 0.7242 (range 0.7220-0.7304)
  • USD/CAD -0.1% to 1.2179 (range 1.2131-1.2220)
  • GBP/USD -0.6% to 1.3209 (range 1.3185-1.3329)
  • USD/CHF +0.4% to 0.9642 (range 0.9584-0.9661)
  • 1-mo. USD/TWD NDF +0.4% to 30.035
  • USD/CNH +0.2% to 6.5477 (range 6.5231-6.5489)
  • Bloomberg Dollar Spot Index +0.4% to 1148.03
  • JPM Emerging Mkt FX Index -0.5% to 70.70
  • JPM FX Volatility Index +0.6% to 8.27
  • U.S. stocks higher
    • S&P 500 +0.1% to 2498.37
    • DJIA +0.2% to 22158
  • Commodities:
    • WTI Crude +2.3% to $49.34/bbl
    • Gold -0.7% to $1,322/oz (range $1,321-$1,337)
    • Copper -1.7% to $6,553/mt

TECHNICAL OUTLOOK by Bloomberg strategist Vincent Cignarella

  • USD/JPY — Higher toward 55-DMA
  • Resistance: 110.83 55-DMA; 111.16 wave span
  • Support: 109.90/93; 109.51 Sept. 11 high
  • EUR/USD — Consolidating within short-term bear trend
  • Resistance: 1.2015 Sept. 8 low; 1.2036 Sept. 11 high
  • Support: 1.1885 2nd upper band; 1.1850/52 Sept. 1/4 lows
  • EUR/JPY — Consolidating short-term upward momentum
  • Resistance: 132.32 Jan. 29, 2016 high; 132.47 Dec. 28, 2015
  • Support: 131.09 Sept. 7 high; 130.91 Sept. 11 high
  • AUD/USD — Held upper band, new range 0.7968/0.8146
  • Resistance: 0.8049 Sept. 7 high; 0.8073 Sept. 11 high
  • Support: 0.7968 2nd upper band; 0.7942 Sept. 5 low
  • NZD/USD — Consolidating, holding below 0.7316 50-DMA
  • Resistance: 0.7335/37 multiple tops; 0.7371 Aug. 10 high
  • Support: 0.7203 100-DMA; 0.7192/98 Aug. 24/23 lows
  • USD/KRW 1M Fwd — Consolidating around 50/100-DMAs
  • Resistance: 1136.90 Sept. 7 high; 1138.15 Sept. 6 high
  • Support: 1126.29 Sept. 11 low; 1119.65 Sept. 4 low
  • USD/THB — Consolidating losses below 50-DMA
  • Resistance: 33.175 Sept. 6 high; 33.229 Aug. 31 high
  • Support: 33.035 Sept. 7 low; 32.969 May 1 2015 low
  • USD/SGD — Consolidating within downtrend
  • Resistance: 1.3539 Sept. 6 high; 1.3575 Sept. 5 high
  • Support: 1.3411 Sept. 11 low; 1.3346 Sept. 8 low
  • USD/TWD — Consolidating within downtrend
  • Resistance: 30.065 Sept. 7 high; 30.177 Sept. 4 high
  • Support: 29.897 Sept. 7 low; 28.860 July 4 2014 low
  • USD/MYR — Resuming downtrend
  • Resistance: 4.2262 Sept. 7 high; 4.2695 Sept. 5 high
  • Support: 4.1825 Sept. 8 low; 4.1775 Nov. 9 low
  • USD/PHP — Holding 50.853 50-DMA
  • Resistance: 51.194 Sept. 6 high; 51.222 Aug. 29 high
  • Support: 50.666 Sept. 8 low; 50.576 Aug. 10 low
  • USD/INR — Consolidating below multiple DMAs
  • Resistance: 64.0550 Sept. 7 high; 64.2600 Sept. 6 high
  • Support: 63.8375 Sept. 11 low; 63.7862 Sept. 8 low
  • USD/IDR — Consolidating within downtrend
  • Resistance: 13305 Sept. 7 low; 13335 Sept. 7 high
  • Support: 13098 Nov. 10 low; 13052 Nov. 9 low

To contact the reporter on this story: Katherine Greifeld in New York at kgreifeld@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Greg Chang

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