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THE ASIA FX/RATES DAYBOOK: FX/RATES DAYBOOK ASIA: USTs Sold Off Friday; N. Korea Bomb Test

(Bloomberg) — Markets were whipsawed Friday by a combination of disappointing U.S. August jobs data and reports that European Central Bank officials may still be a ways away from detailing plans to scale back asset purchases. The greenback pared early losses as the euro fell, while Treasuries sold off throughout the day. Reaction to North Korea’s Sunday test of a powerful hydrogen bomb may affect markets throughout the Monday session. WHAT TO WATCH

  • BOJ outright bond purchases; see more below
  • Indonesia Aug. CPI Core YoY, est. 3.0%

FRIDAY TRADING SESSIONS

  • Bloomberg dollar index rebounded to little changed after falling ~0.6% after jobs data; USD/CAD broke 1.2400 psychological level to touch 1.2341, the lowest since June 2015; euro rose to 1.1980, then snapped back below 1.1900; UST 10Y yields ended at 2.16% as yield curve steepened, with 2s30s leading the way wider by ~2.5bps to 142bps
  • S&P 500 rose 0.2%; gold rose 0.3% to $1,325
  • In the European session, the euro climbed to session high of 1.1930 after hawkish comments by ECB member Ewald Nowotny; UST 10Y yields increased by ~1bps to 2.13%

TOP OVERNIGHT NEWS

  • North Korea’s test of a powerful hydrogen bomb heightens Kim’s threats
  • ECB policy makers may not be ready to decide on next year’s bond-purchase plan until December, according to euro-area officials familiar with the matter
  • The August employment report may have been disappointing, but it wasn’t weak enough to call into question the underlying strength of the U.S. labor market
  • Trump says he’s looking into the future of the U.S.’s trade accord with South Korea, following a report he’s considering terminating the pact
  • India gets new defense minister in Modi cabinet reshuffle
  • Nafta negotiators are said to tackle labor and rules of origin

KEY VIEWS

  • Analysts suggest that August’s disappointing payrolls won’t deter Fed from announcing its balance-sheet reduction plan next month
  • Though the headline jobs miss may not be a “death knell” for the dollar, the average hourly earnings miss is more concerning longer term, given its implications for inflation, Jefferies says

DATA RELEASED FRIDAY

  • U.S. added just 156k jobs in August, vs est. 180k; unemployment rate rose to 4.4% from 4.3%; average hourly earnings rose 0.1% m/m, missing expectations of a 0.2% gain
  • ISM manufacturing index climbed to 58.8 vs est. 56.5 in July, showing that increases in consumer spending and business investment are delivering sustained gains in manufacturing

ECONOMIC DATA (All times HK):

  • 7:50am: (Japan) Aug. Monetary Base End of period, prior ¥468.3t
    • Aug. Monetary Base YoY, est. 15.6%, prior 15.6%
  • 8:30am: Aug. Nikkei Indonesia PMI Mfg, prior 48.6
  • 8:30am: Aug. Nikkei Philippines PMI Mfg, prior 52.8
  • 8:30am: Aug. Nikkei Malaysia PMI, prior 48.3
  • 9am: (Australia) Aug. Melbourne Institute Inflation YoY, prior 2.7%
    • Aug. Melbourne Institute Inflation MoM, prior 0.1%
  • 9:30am: (Australia) 2Q Company Operating Profit QoQ, est. -4.0%, prior 6.0%
    • Aug. ANZ Job Advertisements MoM, prior 1.5%
    • 2Q Inventories SA QoQ, est. 0.3%, prior 1.2%
  • 12pm: (Indonesia) Aug. CPI Core YoY, est. 3.0%, prior 3.05%
    • Aug. CPI YoY, est. 3.98%, prior 3.88%
    • Aug. CPI NSA MoM, est. 0.05%, prior 0.22%
  • 9pm: (Singapore) Aug. Purchasing Managers Index, prior 51
    • Aug. Electronics Sector Index, prior 52.2

GOVERNMENT:

  • 10am: New Zealand Treasury Publishes Monthly Economic Indicators

CENTRAL BANKS (All times HK):

  • 9:10am: BOJ Outright Bond Purchase 10-25 Years
    • BOJ Outright Bond Purchase 25 Years

BOND SALES/PURCHASES (All times HK):

  • For corporate bonds, see New Issue Monitor
  • 9:30am: Korea Central Bank to Sell KRW500b 182-Day Bills
  • 10:30am: Korea to Sell KRW1.55t 5-Year Bonds
  • 11am: Thailand Plans to Sell THB15.7b 364- Day Bills
  • 11am: Bk of Thailand to Sell THB5b 91-Day Bills
  • 12:30pm: Taiwan to Sell TWD170.0b 364-Day NCD
  • 1pm: Korea Central Bank to Sell KRW1.1t 91-Day Bills

MARKETS as of LATE FRIDAY

  • USD/JPY +0.3% to 110.27 (range 109.56-110.47)
  • EUR/USD -0.4% to 1.1862 (range 1.1850-1.1980)
  • AUD/USD +0.2% to 0.7966 (range 0.7922-0.7994)
  • NZD/USD -0.2% to 0.7162 (range 0.7148-0.7207)
  • USD/CAD -0.7% to 1.2390 (range 1.2341-1.2492)
  • GBP/USD +0.2% to 1.2954 (range 1.2906-1.2995)
  • USD/CHF +0.7% to 0.9650 (range 0.9547-0.9653)
  • USD/CNH -0.6% to 6.5574 (range 6.5452-6.5984)
  • 1-mo. USD/TWD NDF -0.4% to 29.955
  • Bloomberg Dollar Spot Index little changed at 1152.71
  • JPM Emerging Mkt FX Index +0.3% to 70.90
  • JPM FX Volatility Index -0.6% to 7.95
  • U.S. stocks higher
    • S&P 500 +0.2% to 2476.55
    • DJIA +0.2% to 21988
  • Commodities:
    • WTI Crude +0.2% to $47.32/bbl
    • Gold +0.3% to $1,325/oz (range $1,317-$1,329)
    • Copper +0.7% to $6,835/mt

TECHNICAL OUTLOOK by Bloomberg strategist Vincent Cignarella

  • USD/JPY — Consolidating around 110.00
  • Resistance: 110.67 Aug. 31 high; 110.85/95 Aug.15/16 highs
  • Support: 109.55 Aug. 30 low; 109.03 Aug. 28 low
  • EUR/USD — Orbiting 1.1910 intermediate wave
  • Resistance: 1.1984 Aug. 24/30 highs; 1.2070 Aug. 29 high
  • Support: 1.1823/24 Aug. 23/22 highs; 1.1808 2nd upper band
  • EUR/JPY — Uptrend rolling over, showing signs of exhaustion
  • Resistance: 131.58 Aug. 31 high; 131.71 Aug. 30 high
  • Support: 130.60 pivot S1; 130.44 Aug. 25 high
  • AUD/USD — Tested held above 0.7935 2nd upper band support/resistance
  • Resistance: 0.7996 Aug. 30 high; 0.8043 Aug. 1 high
  • Support: 0.7867 Aug. 24 low; 0.7845 Aug. 14 low
  • NZD/USD — Consolidating between 100/200-DMAs
  • Resistance: 0.7218 Aug. 29 low; 0.7231 Aug. 28 low
  • Support: 0.7132 200-DMA; 0.7114 June 5 low
  • USD/KRW 1M Fwd — Consolidating below 100-DMA
  • Resistance: 1128.45 Aug. 29 high; 1131.65 Aug. 24 high
  • Support: 1118.15 Aug. 29 low; 1115.85 Aug. 1 low
  • USD/THB — Consolidating losses below 50-DMA
  • Resistance: 33.292 Aug. 28 high; 33.367 Aug. 24/25 highs
  • Support: 33.129 Sept. 1 low; 32.969 May 1 2015 low
  • USD/SGD — Consolidating within downtrend
  • Resistance: 1.3622 Aug. 25 high; 1.3641 Aug. 21 high
  • Support: 1.3501 Sept. 9 low; 1.3482 Sept. 7 high
  • USD/TWD — Lower within downtrend
  • Resistance: 30.269 Aug. 25 high; 30.317 Aug. 22 high
  • Support: 30.022 Sept. 1 low; 29.938 May 22 low
  • USD/MYR — Grinding sideways below 50-DMA
  • Resistance: 4.2797 Aug. 25 high; 4.2817 Aug. 24 high
  • Support: 4.2640 Aug. 28 low; 4.2580 June 14 low
  • USD/PHP — Consolidating short-term downtrend
  • Resistance: 51.222 Aug. 29 high; 51.305 Aug. 23 high
  • Support: 50.993 Aug. 29 low; 50.576 Aug. 10 low
  • USD/INR — Consolidating below DMA
  • Resistance: 64.0887 Aug. 24 high; 64.1425 Aug. 22/23 highs
  • Support: 63.8563 Aug. 28 low; 63.7150 Aug. 9 low
  • USD/IDR — Sideways, no clear direction
  • Resistance: 13353 Aug. 25 high; 13383 Aug. 16 high
  • Support: 13316 Sept. 1 low; 13220 Aug. 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, Joanna Ossinger

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