PLF

Expanding on my experience as an investment management professional and providing advisory services pertaining to corporate finance, financial risk management, developing strategies for growth as well as assessing financial performance. I have created...

[marketsandyou]

Japanese Yen Climbed Up While Stocks Plummet 

The dollar was marked down as deep as 109.22 yen at the opening, off a whole yen from late on Friday, but there was no follow-through selling and it was last at 109.84. 

Japan is the world’s largest creditor nation and traders tend to assume Japanese investors would repatriate funds at times of crisis, thus pushing up the yen. Many wonder, however, if Japanese assets would really remain in favor if an actual war broke out in Asia.

Japan’s Nikkei did not take the news well, losing 0.9 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan. South Korea’s main index .KS11 down 0.6 percent.

Futures on 10-year U.S. Treasuries climbed 5 ticks, while yields on Japanese 10-year government debt rallied to their lowest since last November. E-Mini futures for the S&P 500 dipped 0.3 percent, though U.S. markets will be closed on Monday for the Labor Day holiday.

The dollar slipped to 0.9610 Swiss francs from 0.9646, and was off 0.15 percent against a basket of currencies at 92.674. Gold hit a 10-month high and was last up 0.6 percent at $1,332.20. 

The euro was a shade firmer at $1.1880 with investors wary ahead of a European Central Bank meeting on Thursday. There have been reports some at the ECB are unhappy with the euro’s strength and are in no rush to signal the start of a tapering in its massive balance sheet.

In the oil market, prices were mixed as shutdowns of U.S. production following Hurricane Harvey were balanced by an expected downturn in crude demand as the storm knocked out refineries along the Gulf of Mexico.

Brent crude eased 29 cents to $52.46, while U.S. crude gained 14 cents to $47.43 a barrel.

[marketsandyou]

Nuclear Test in North Korea Signifies Trouble for Stocks in September

September is a much dreaded month or much maligned, depending on what you believe, for investing in the stock market.

Those who indulge in crystal ball gazing based on historical data will point out that this month is the only one out of the 12 in a year in which the Dow Jones Industrial Average has been lower on average over the past 20, 50, and 100 years.

What is clear though is that this September has got off to a wobbly start, thanks to the bellicose of North Korea. The country conducted sixth nuclear test that generated tremors five to six times as powerful as its previous nuclear test. This came just hours after Pyongyang claimed it had developed a hydrogen bomb that could be loaded into a long-range missile.

With the Kim Jong Un regime escalating tensions with the United States, nervous investors are apt to sell risky investments and seek safe havens in US Treasuries or the Japanese yen. This is likely to trigger a global selloff in equities and bonds when market resumes today.

Last week, US equity markets rebounded fairly quickly after Mr Trump did not pronounce any radical action against North Korea following its launch of a missile that flew over Japan beyond saying that all options are on the table.

On the economic front, the investment temperature is rather more benign, judging by last Friday’s labour and manufacturing data in the US. While US non-farm payrolls have come in well below expectations - with 156,000 jobs added last in August after two straight months of strong gains - the pace of the increase is enough to prod the Federal Reserves to start trimming its bloated balance sheet.

Moreover, the key US manufacturing sector accelerated in August at its fastest pace in six years, driven by gains in output and employment. A rollback of the Fed balance sheet will drain the financial system of excessive liquidity that has kept interest rates artificially low since the 2008 global financial crisis.Higher interest rates are thought to be good for banks.

[marketsandyou]

CEFC will Invest  $20 Million on Lithium Mine to Support Power Stability in Australia

Clean Energy Finance Corporation will invest on a lithium mine to support  power stability in Australia as the market increasingly dependent on variable wind and solar power.

The government will make a $20 million investment as part of a $132 million secured bond issued by an offshoot of Pilbara Minerals, an ASX listed company that hopes to extract lithium and supply the market for lithium ion battery storage products for electricity and electric vehicles.

The lithium concentrate supplies to be produced by this project will help build Australia’s capacity to supply much needed resources for the clean energy technologies that are set to play a vital role in increasing the use of renewable in our future energy mix.

The move comes as the government looks to prove it is being technology neutral in its efforts to beef up power supply in tackling over whether that should include subsidies for coal fired power.

The proceeds of the bond issue together with $80 million raised in a share sale will underpin the $234 million required for the project’s first stage of development. Construction is expected to start in early 2018.

The government also awarded a $2 million grant to Australian researchers developing ultra thin, screen printed batteries for use in both large scale energy storage and in cheap, portable devices.

[plfmarkets]

CURRENCY UPDATE

USD/CAD Intraday bias is back on the downside for 1.3222 support next. We'd holding on to the view that whole choppy rise from 1.2460 has completed at 1.3793. Break of 1.3222 will affirm our bearish view and target 1.2968 key support for confirmation. On the upside, above 1.3387 support turned resistance will turn intraday bias neutral.

Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. Nonetheless, sustained trading above 1.3838 would pave the way to retest 1.4689 high.

USD/JPY Below 109.11 will target 108.12 low first. Break will extend the whole corrective fall from 118.65 to 61.8% retracement of 98.97 to 118.65 at 106.48. We will look for bottoming sign there. Meanwhile, break of 110.70 will suggest near term reversal and turn bias back to the upside for 114.36 resistance instead.

Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

AUD/USD Above 0.7566 will target 0.7748 resistance. In that case, we'll be cautious on topping again as it approaches medium term fibonacci level at 0.7849. On the downside, below 0.7456 minor support will turn bias back to the downside for 0.7328 short term bottom.

Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8091) and above.

EUR/USD Decisive break there will carry larger bullish implication and target 1.1615 resistance next. On the downside, break of 1.1109 support will indicate short term topping and rejection from 1.1298. In such case, intraday bias will be turned to the downside for 1.0838 support.

Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

USD/CHF Near term outlook remains bearish. Break of 0.9613 will extend the whole fall from 1.0342 to 0.9548 support and below. We'd start to look for bottoming signal again as it approaches 0.9443 key support level. 

Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. 

[plfmarkets]

Osisko Shares Bounce after Acquiring Orion Mine’s Assets for $1.13 Billion

Osisko Gold shares bounce more than 10 percent after they decided to acquire a precious metals portfolio from Orion Mine Finance Group for $1.13 billion. The acquisition will result in Osisko holding a total of 131 royalties and streams, including 16 revenue-generating assets.

The company was trading up 9.7% to $15.80 in Toronto and almost 9.9% higher in New York to $11.72 on the news of the acquisition.

Osisko, created in June 2014 following the acquisition of Osisko Mining by Agnico Eagle Mines and Yamana Gold, said it will pay Orion $675-million in cash and the remaining $450-million in company shares for the assets.

The transaction gives the Canadian company a 9.6% diamond stream on the Renard diamond mine and a 4% gold and silver stream on the Brucejack gold and silver mine, in addition to a 100% silver stream on the Mantos Blancos copper mine in Chile.

Osisko’s flagship, Canada’s largest producing gold mine will continue to be the 5% net smelter return royalty on the Malartic mine.

[plfmarkets]

WTI Oil Extended Recovery Rally

WTI Oil extended recovery rally and hit session high at $48.40 in early Monday’s bullish acceleration. Oil price accelerated higher on fresh geopolitical instability. So far unable to sustain break above $48.00 barrier, as action was capped by falling hourly cloud.

However, rising uncertainty over geopolitical situation in the Gulf region would further boost oil price. Additional support comes from long-tailed daily candle left on Monday, which signaled strong downside rejection and failure to clearly break below lower pivot at $46.89

Extended recovery needs close above $48.74 to generate stronger reversal signal and open way for further retracement of $46.74 towards a cluster of strong MA barriers between $49.00 and $49.66.

Session low at $47.65 marks solid support which is expected to hold dips and keep near-term focus at the upside.

Break and extension below $47.40 would signal an end of recovery rally from $46.74 and shift near-term focus lower.

[plfmarkets]

GOLD 

Gold spot gold in Northern America is trading at $1254.88 an ounce. On the release front, US numbers started the week on a soft note. ISM Manufacturing PMI dropped to 54.8, short of the estimate of 56.6 points. This marked a 4-month low. 

US Personal Spending dipped to 0.0%, shy of the forecast of 0.2%. US Treasury Secretary Steven Mnuchin will deliver remarks at the Milken Conference in Los Angeles.

The US economy appears to have hit some turbulence, as underscored by a disappointing Advance GDP for the first quarter. The economy expanded at just 0.7%, well below the forecast of 1.3%. Consumer indicators have also been softer than expected.  

Consumer spending is also raising concerns, and Personal Spending dipped to 0.0% in March, the first time the indicator hasn't posted a gain since July 2016. Key employment data, highlighted by Nonfarm Payrolls, will be released on Friday. If these indicators miss expectations, investor jitters could push gold to higher levels.

[plfmarkets]

ASIAN STOCKS

Asian stocks climbed with U.S. futures, bonds retreated and the yen erased gains. The MSCI Asia Pacific Index rose, after capping a fourth straight month of gains on Friday. 

Japanese shares advanced after its best week of the year. The yen weakened for the fifth day out of six, while Treasuries retreated with gold. Oil climbed from its lowest level in a month.

According to the Republican and Democratic aides, the U.S. House and Senate negotiators reached a tentative bipartisan agreement Sunday night on a $1.1 trillion bill to keep the government open through the end of September.

The news triggered a swing in markets this morning in Asia after equities and currencies traders had been loath to take additional risk ahead of a busy week for macro-economic events and data.

Trading volumes may be lower than average due to the Labor Day or May Day holiday in many countries, including China, India, Russia, U.K., Hong Kong, Germany, Singapore and Mexico. Later on this week Japan will be closed for a three-day holiday.

China data from the weekend showed a decline in manufacturing and services sectors. That followed weaker-than-expected U.S. growth in the first quarter, casting doubts on the strength of the global expansion after optimism on the economy and earnings pushed stocks to records last month.

Investors will be watching comments from a policy meeting of the Federal Open Market Committee this week and the monthly U.S. employment report on Friday, with the second round of the French presidential election on May 7. Traders are also weighing the possibility of escalating tension between the U.S. and North Korea.

[marketservicesaustralia]

CURRENCIES

AUD/USD Intraday bias is back on the downside for 0.7490 key near term support next. As noted before, firm break of 0.7490 will confirm completion of rise from 0.7158. In such case, near term outlook will be turned bearish for 0.7158 support. 

Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8165) and above.

GBP/USD Price actions from 1.1946 are viewed as a consolidation pattern pattern. On the downside, below 1.2376 will target 1.2108 support next. Break there will be an early sign of larger down trend resumption. On the upside, break of 1.2614 will extend the rise from 1.2108. 

Fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term reversal yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532.

USD/CHF Sustained trading above 55 day EMA (now at 1.0022) will affirm this bullish case. Break of 1.0169 resistance will confirm and target a test on 1.0342 high. On the downside, however, below 0.9948 minor support will turn bias back to the downside for 0.9812 instead.

Decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we’ll stay neutral in the pair first. In case of another fall, we’d expect strong support from 0.9443/9548 support zone.

USD/JPY Break of 112.19 temporary will turn bias back to the upside for 115.49 resistance. Decisive break there should confirm completion of the correction from 118.65. In that case, further rise should be seen to 118.65 and above to resume the rally from 98.97. 

Price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance.

[marketservicesaustralia]

FOREX

Dollar Index (100.40) has made a high at 100.60, very close to our initial target of 100.70 but the strength at the higher levels hint at further rally towards 101.00 in the coming days.

Euro (1.0678) has found interim support near 1.0650 for now but failure to rise and sustain above 1.0700 levels may push it down once again towards 1.0580.

Dollar-Yen (111.36) has been rejected exactly from our interim resistance of 112.15 but as long as it trades above 110.90-75, the chances of seeing 112.80 and 113.40 can’t be ruled out.

Pound (1.2544) continues trading in the range of 1.2350-1.2600 just as expected and no change in this range bound price action is seen for the next few sessions.

Aussie (0.7612) has been trading in the narrow range of 0.7600-0.7675 for the last 7-8 sessions but it is standing at crossroads now. Either an immediate bounce from 0.7600 levels is seen or the decline extends to 0.7530-00. Wait and watch.

Dollar Rupee (64.85) is trading absolutely flat in the NDF market this morning. Our target of 64.80 has been met but the chances of seeing 64.60 still on the cards. 

Immediate resistance comes at 64.95-65.00. It remains to be seen if 64.80-60 holds as expected or not.

[plfmarkets]

China warns Money Outflows via FTZ Disguised as Foreign Investment

China's central bank has urged commercial banks in Shanghai to guard against money outflows via the Shanghai Free Trade Zone (FTZ) disguised as foreign investment.

The Shanghai headquarters of the People's Bank of China asked for particular vigilance against money originating in other provinces or cities in China that flowed into the FTZ en route abroad.

The guidance from the PBOC's was the latest in a string of measures to stem surging capital outflows as the yuan currency plumbs 8-1/2 year lows against the surging U.S. dollar.

On Wednesday it said it would crack down on capital flight and closely monitor abnormal capital flows through the FTZ.

Capital Economics estimated that capital outflows last month were the largest since January and posed a threat to China's exchange rate regime.

The Shanghai FTZ was launched in 2013 to promote international trade and cross-border investment but three years later the city government is trying to balance efforts to accelerate financial reforms in the zone while preventing capital outflows.

While Beijing has been busily damming up official channels for money to leave China, more than ever is leaking out through shady means as investors flee the country's slowing economy and weakening currency, financial industry executives say.

[plfmarkets]

Rio Tinto (ASX, LON:RIO) is cutting more jobs across its iron ore division in Western Australia as part of a major restructuring of its most profitable division.

While the company did not release numbers, it did confirm that  "rolling reductions" were underway, which are estimated to be around 500 jobs or 4% of Rio Tinto’s ore division’s workforce. Currently, the company employs about 11,000 people after shedding about 700 workers early this year and about 800 in March 2015. 

Iron ore prices went up close to $80 a tonne early this month and the steelmaking ingredient was selling for $70.34 on Monday, dropping more than $2 per tonne since Friday, according to the Metal Bulletin Index. 

BHP, Rio Tinto and Fortescue Metals Group have all flagged that they expect iron ore prices to fall further next year, perhaps back to about $40 per tonne.

Last week, the company announced it would suspend mining at one of its local operations for the first time since the global financial crisis forced Rio to begin to cutting costs.

[plfmarkets]

AUD/USD Break of 0.7754 cannot be ruled out but we'd expect strong resistance from 0.7833 to limit upside and finally bring reversal. Choppy rise from 0.7144 is seen as a corrective pattern. 

Sustained break of 0.7833 resistance will now be a strong sign of medium term reversal.  The pair is staying inside long term falling channel and it's likely that the down trend from 1.1079 is still in progress.

USD/CAD Current rebound form 1.2460 would target 50% retracement of 1.4689 to 1.2460 at 1.3575. We'd be cautious on strong resistance between there and 61.8% retracement at 1.3838. 

Price actions from 1.4689 medium term top are seen as a correction pattern. The first leg should have completed at 1.2460. Current rebound from there could extend to 61.8% retracement of 1.4689 to 1.2460 at 1.3838 and above. 

GBP/USD Near term outlook is bearish with 1.2476 minor resistance intact. Below 1.2088 will turn bias to the downside for 1.1946. Break there will extend the larger down trend to 100% projection of 1.5016 to 1.2794 from 1.3444 at 1.1222. 

The down trend from 2005 high of 2.1161 is still in progress and met 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 already. Oversold condition in both weekly and monthly RSI suggests a bounce is due. 

USD/JPY Further rise is expected as long as 103.15 support holds. As noted before, price actions from 98.97 are probably developing into a medium term consolidation. Above 105.52 will target 107.48 resistance. 

Price actions from there are developing into a consolidation pattern. But at this point, we're expecting at least another fall to 61.8% retracement of 75.56 (2011 low) to 125.85 at 94.77 before the trend reverses. 

USD/CHF Rebound from 0.9536 should have completed at 0.9998 on bearish divergence condition in 4 hours MACD. Intraday bias remains on the downside for 0.9639 support first. 

Sustained break of 0.9998 will argue that it's completed and retest of 1.0327 should be seen. Meanwhile, in case of another fall, we'd expect strong support between 0.9072 and 0.9256 support to contain downside and finally bring reversal.

[plfmarkets]

STOCKS

Dow Jones (18142.42, -0.10%) could test channel support near 10600-10500 region and bounce back towards 10800 again in the near term. It has been trading within the 18000-18300 region and there is not much scope of predicting further direction unless we see a break on either side of this range.

Dax (10665.01, -0.29%) is holding itself below the resistance at 10800 and while that holds, a short dip to 10600 or lower is possible. Note that 10800-10860 zone could prove to be a strong resistance which may not be very easy to break on the upside. We may expect a sharp decline from 10800 levels in the near term.

Nikkei (17390.82, -0.20%) is testing resistance near 17400 and while that holds, we could see a fall towards 17100 in the near term. Also note that Dollar-Yen (104.81) is testing similar resistance in the 105-106 region and could come down as well. A break above 106 on the upside could possibly take Nikkei also above 17400 levels. Keep a close watch on Dollar Yen.

Shanghai (3111.23, +0.35%) had come off from levels near 3130 as expected and is now trading higher after getting some support near 3075. We could see some interim support emerging at 3075-3050 region which may keep prices stable.

Nifty (8625.70, +0.12%) could see a dip to 8600-8500 again in the near term while the down channel on the daily charts hold. Some consolidation in the 8700-8500 region is possible this week.

[plfmarkets]

COMMODITIES

Gold (1253.13) remains almost unchanged in the range of 1245-80 with no immediate sign of any break visible. Repeat, it still requires a break above 1275-80 to negate the immediate risk for more downside towards 1200.

With the Gold-Silver ratio (71.91) rising for the last few days, Silver (17.418) is under performing Gold but may not drop below 17.00 in a hurry with the chances of sideways consolidation in 17.00-18.00 looking higher at the moment.

Brent (51.87) tried to bounce back but was rejected from our resistance of 52.65-85 which must be broken to the upside to avoid further decline towards 50.00-49.70.

The chances of a small Triangle pattern formation in WTI (50.19) can’t be ruled out with decisive moves coming only above 51.60 or below 49.20 but the contraction in 49.00-51.00 may continue for another couple of sessions.

Copper (2.117) is trying to bounce from the major support of 2.10 in line with our expectations and may rise to 2.15 in the next few sessions.

[plfmarkets]

China

Inflation data overnight points to further easing of deflationary pressures in China. In combination with concern over bubbling house prices and rising financial risks, it puts monetary policy firmly on hold.

Chinese CPI inflation rose more strongly than expected to 1.9% y/y in September (consensus: 1.6% y/y, previous: 1.3% y/y). The increase was due partly to higher food price inflation but inflation excluding food also increased from 1.4% y/y to 1.6% y/y. It has been trending higher since it hit a bottom in early 2015 at 0.6% y/y. However, it is still far below the government's target of 3%.

Producer price inflation also surprised to the upside and left deflation territory for the first time since 2011. It has been our view since spring though that PPI deflation would end as higher commodity prices would push up producer prices. PPI also rose m/m by 0.5%, which was the sixth rise in the past seven months.

The increase in PPI is a big driver behind the rebound in industrial profits seen this year. Along with higher volumes, we look for a further increase in PPI inflation in coming months as it is being driven mainly by industrial commodity prices and we expect these to continue to trend higher on the back of the recovery in Chinese construction. 

Overall deflationary pressures are easing in China at the moment. We expect this to continue in coming quarters. However, as we see the recovery losing some steam in 2017, deflationary pressures could return at some point next year.

We expect monetary policy to be on hold for now but look for renewed easing in 2017 as growth tapers off again. The risk to our view is that China is increasingly using regional measures to control the housing market as there is a very large dispersion across the country.

[plfmarkets]

EUR/USD Decisive break will also affirm the case that whole rebound form 1.0517 is completed at 1.1615 and will target a test on 1.0517 low. On the upside, above 1.1070 minor resistance will turn bias neutral. 

Price actions from 1.0461 are viewed as consolidation pattern to fall from 1.3993. Break of 1.0461 will extend the decline from 1.3993. On the upside, break of 1.2042 support turned resistance is needed to be the first sign of trend reversal.

USD/CHF Outlook will stay mildly bearish. Below 0.9766 minor support will turn bias to the downside for 0.9839 support first. Break will likely extend whole corrective decline from 1.0327 through 0.9443 low.

Rejection from 0.9955 resistance suggests that it's still in progress for another low below 0.9443. In that case, we'd expect strong support between 0.9072 and 0.9256 support to contain downside and finally bring reversal.

GBP/USD Current down trend is expected to extend to 100% projection of 1.5016 to 1.2794 from 1.3444 at 1.1222. Break of 1.2476 will suggest short term bottoming and bring lengthier consolidation before down trend resumption.

The down trend from 2005 high of 2.1161 is still in progress and met 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 already. Sustained trading below 1.2457 could pave the way to 100% projection at 0.9532. 

USD/CAD Break there will affirm the case of near term reversal and target next key near term support at 1.2763. However, sustained break of 1.3311 will extend the rise from 1.2460 and target 1.3838 fibonacci level.

Price actions from 1.4689 medium term top are seen as a correction pattern. Such correction could still extend lower and below 1.2460 will target 50% retracement of 0.9406 to 1.4689 at 1.2048, which is close to 1.1919 medium term support. 

AUD/USD Deeper fall should be seen back to 0.7441 support now. Break will indicate that the corrective rise from 0.7144 has also completed at 0.7754. In that case, outlook will be turned bearish for 0.7144 support again.

Break of 0.6826 low will confirm this bearish case and target 61.8% projection of 0.9504 to 0.6826 from 0.7833 at 0.6178 next. We'll be looking for bottoming sign again as it approaches 0.6008 key support level.