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Markets Returning to Risk-on Mode, Dollar Vulnerable to More Downside

Dollar and Yen are back under some selling pressure today, as markets seem to be returning to risk-on mode. NASDAQ hit another record high overnight, and Asian markets are generally trading in black. The greenback’s weakness is also seen as it’s vulnerable to breaking a key psychological level against the Chinese Yuan. Australian and New Zealand Dollar are the relatively stronger ones. Canadian Dollar is mixed, awaiting BoC. Sterling is also mixed, awaiting Brexit trade talks developments.

Technically, Gold appears to be losing some momentum but further rise is expected as long as 1821.96 support holds. At the same time, this week’s recovery in Dollar has been clearly weak so far. Such recovers could end any time soon. Break of 1.2177 temporary top in EUR/USD, and 0.8875 temporary low in USD/CHF could be the first signals of selloff resumption in Dollar. Such moves could be accompanied by break of 1875.27 temporary top in Gold.

In Asia, currently, Nikkei is up 1.18%. Hong Kong HSI is up 0.92%. China Shanghai SSE is down -0.23%. Singapore Strait Times is up 0.62%. Japan 10-year JGB yield is down -0.001 at 0.019. Overnight, DOW rose 0.35%. S&P 500 rose 0.28%. NASDAQ rose 0.50%. 10-year yield dropped -0.015 to 0.913.

Japan machine orders rose 17.1% mom in Oct, largest monthly jump since 2005

Japan machine orders rose 17.1% mom in October, well above expectation of 2.8% mom. That’s also the largest month-on-month rise on record since 2005. By sectors, manufacturing orders rose 11.4% mom while non-manufacturing rose 13.4% mom.

The data affirmed the improving trend in capital expenditure. Investments could be further boosted ahead by the government’s Fresh JPY 40T stimulus. Yet, the volatile series is up for revision while the exporters might continue to struggle to gain momentum due to global weakness.

China CPI fell for first time since 2009, USD/CNH to break 6.5 psychological support

China’s CPI dropped -0.5% yoy in November, well below expectation of 0.0% yoy. That’s also the first annual decline in more than a decade since October 2009. Though, it’s driven by one off factor as pork supply improved from the disruption African swine fever. At the same time, demand remained solid despite Wuhan coronavirus outbreak. PPI decline slowed to -1.5% yoy, versus expectation of -1.8% yoy.

Offshore Chinese Yuan’s up trend against dollar resumes today, with USD/CNH now pressing 6.5 handle. Near term outlook stays bearish as long as 6.5968 resistance holds. Next target is 61.8% retracement of 6.0153 (2014 low) to 7.1953 at 6.4661. Strong support is expected from there to bring a sustainable rebound, based on pure technical perspective.

Though, recent decline in USD/CNH is seen as more as an indication of general weakness in Dollar against Asian majors. Sustained break of 6.4661 could signal acceleration in the flows, which might spread to selling in the greenback elsewhere.