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Canadian Dollar Rebounds on Strong Oil Prices, Yen Firmer on Mild Risk Aversion

Canadian recovers notably today following the strong rally in oil prices, after attack on Saudi Arabia’s oil production. Yen follows as the second strongest on mild risk aversion, as sentiments are also weighed down by poor Chinese data. On the other hand, Sterling is the paring some of last week’s rebound, awaiting meeting between UK Prime Minister Boris Johnson and EU President Jean-Claude Juncker. Australian Dollar is the second weakest, then Dollar.

Technically, while cross crosses trade generally lower today, there is not confirmed sign of completion of recent rebound yet. Focuses will be on 107.19 minor support in USD/JPY, 117.55 minor support in EUR/JPY and 132.17 minor support in GBP/JPY. GBP/USD has just hit 1.2502 and might retreats mildly. But further rise will remain in favor as long as 1.2283 minor support holds. Also, despite today’s retreat, further rise will remain in favor in USD/CAD as long as 1.3177 minor support holds, for 1.3382 resistance.

In Asia, Japan is on holiday today. Hong Kong HSI is down -1.08%. China Shanghai SSE is down -0.16%. Singapore Strait Times is down -0.06%.

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Oil prices jump after largest production disruption in history

Oil prices surge sharply in response to drone attacks on Saudi Arabia’s oil production on Saturday. State energy producer Saudi Aramco lost about 5.7 million bps of output, which is the largest oil disruptions in history. That’s followed by 5.6m bpd loss in Iranian resolution in late 70s.

Saudi Arabia would need weeks to restore full output capacity even though some halted oil production would be restarted within days. Some noted that the attack highlighted the vulnerability of the infrastructure to attack. Also the tensions have intensified as US President Donald Trump said the US is “locked and loaded depending on verification” that Iran staged the attack.

Chinese Premier Li said very difficult to grow at 6%, data showed deepened slowdown

Chinese Premier Li Keqiang warned that the economy is facing “certain downward pressure” due to global slowdown and rise of protectionism. And, it’s “very difficult” for GDP to grow at 6% rate or higher. He said “for China to maintain growth of 6% or more is very difficult against the current backdrop of a complicated international situation and a relatively high base, and this rate is at the forefront of the world’s leading economies.”

A batch of August data released today showed deepened slowdown in China’s economy. Industrial production growth slowed to 4.4% yoy in August, down from 4.8% yoy and missed expectation of 5.2% yoy. That’s the slowest pace since February 2002. Retail sales growth slowed to 7.5% yoy, down from 7.6% yoy and missed expectation of 8.0% yoy. Fixed assets investments grew 5.5% ytd yoy, below expectation of 5.7% ytd yoy. Surveyed unemployment rate, though, dropped from 5.3% to 5.2%.

UK Johnson to seek Brexit progress in the next few days

UK Prime Minister Boris Johnson will travel to Luxembourg today, to meet outgoing European Commission President Jean-Claude Juncker. Ahead of that, he wrote in the Daily Telegraph that “if we can make enough progress in the next few days, I intend to go to that crucial summit on Oct. 17, and finalize an agreement” for Brexit.

He also criticized the parliament for hampering his negotiation, by approving that law that forces him to seek another delay. He said, “Its effect is completely contrary to the UK’s interests – because it has at least given the impression to our partners that the UK is no longer either fully able or determined to leave on Oct 31.”

Separately, BusinessEurope Director General Markus Beyrer warned that “No deal is a recipe for disaster and should be definitely ruled out. A disorderly, no deal exit of the UK would be extremely harmful for all sides. It would cause massive damage for citizens and businesses in the UK and on the continent alike… The negative consequences would not be limited to the exit date but would drag on, endangering the fruitful and positive future relationship we all aim for.”

Fed rate cut as main event of the week

Four central banks will meet this week Fed, BoJ, SNB and BoE. Fed is undoubtedly the major focus. Marke