Asian Currencies Remain Weak on Yuan Devaluation

Daily Analysis - 12/08/2015


A day after announcing a 2% devaluation, there was no respite for the Chinese Yuan as it continued to be devalued, hitting 6.552 Yuan to one US Dollar at the time of writing. For the day, the Yuan has weakened by another 2.41% and for the past two days, the US Dollar gained 5.4% from the lows off 6.214.

Yuan Continues to Weaken and Drags Down the Aussie and Kiwi Dollars

The move by China to reignite its export business took a turn as the Aussie and the Kiwi dollars weakened significantly when traders attempted to short both these currencies. The Australian economy is particularly vulnerable with China being its biggest trading partner and thus is seen as proxy. AUDUSD is down -0.9% for the day already and since yesterday has declined -2.3% to trade near the lows of 0.723. The surprise move from China comes as import/export data remains weak alongside a sluggish inflation. China had already lowered its GDP forecasts for the year and came under pressure as the Chinese equity markets turned bearish in the recent months. Previous rate cuts from the PBoC in an attempt to stoke inflation have also yielded little to no results.


US Trading Dollar Mixed

The US Dollar has been trading mixed since yesterday as the greenback lost ground to a stronger Euro, while managing to hold on to its gains against the Yen. EURUSD was seen to be bullish as the single currency gained over 1.69% since 5th of August after testing the lows near 1.085. EURUSD was trading at 1.1075 at the time of writing when it was trading a few pips short of 1.109 - 1.11 handle, marking the previous resistance high seen on July 27th. A break above this level could mark a further rally in EURUSD as 1.12 and 1.13 opens up the way for further gains. Against the Yen, the greenback was modestly stronger as an attempt to break above the 125 price level is underway. A close above 125 will be seen very bullish as USDJPY could see further rallying. For the moment, major technical resistance is at the 125.5 - 125.65 region.


Google Announces New Holding Company Alphabet Inc.

Shares in Google closed 4.27% higher for the day and the after hour markets show further buying with an expected gain of 8.22%. Shares in Google surged as the company announced a massive reorganization by creating a holding company called 'Alphabet Inc.' The Company aims to expand into new ventures such as research and development including innovation. Google announced on Monday it’s restructuring while also appointing a new CEO for Google. Shares in Google have been bullish this year gaining over 30% on a year-to-date basis. Google prices gapped up on yesterday's open to trade at 666.40 after closing the day before at 633.25 and is currently testing its 52 week high. There wasn’t much of good news for Apple Inc. however, which has stayed sideways for the most part and the recent quarterly earnings release has seen the company’s share price decline even further to trade near the $113 region.


UK Monthly Jobs Report Due Today

The monthly jobs report for the UK is due later today at 0830 hours GMT. Expectations for the UK jobs report is for the unemployment rate to have remained steady at 5.6% while the claimant count change is expected to show 1.4k new claimants seeking the unemployment benefits. The average earnings index is expected to slow down to 2.8% after rising at a pace of 3.2% previously. The GBPUSD has been trading sideways since 14th July and is stuck in a range of 1.5636 high and 1.5477 lows. Today's labour market report could possibly help break this range although it would be hard to predict the direction. To the downside, on break of the lower range, GBPUSD will see a test to 1.5358 level of support followed by 1.525, while to the upside; a break above the 1.5636 range high will see a test to the previous resistance level at 1.587 and 1.57.


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