Equities ended another day on a happy note with the Dow Jones, S&P
500 and Nasdaq indices closing 1.05, 0.82 and 0.59 percent higher,
respectively. The buoyancy was reflected in FX and commodity markets
with AUD and NZD having surged in some cases over one percent with WTI
clocking in 4.03 percent gains. The anti-risk Japanese Yen was hammered
along with the haven-linked US Dollar and Treasury bonds.To get more
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Market participants shrugged at unrest in the US, where struggling
economic activity amid the Covid-19 pandemic has been hampered further
by state-enforced curfews responding to looting and vandalism. This is
against the backdrop of protests and riots following the killing of
George Floyd by a police officer in Minneapolis.
Traders may be operating on the market-friendly narrative that
easing lockdown measures will lead to a speedy recovery despite
Depression-era high unemployment. This in turn is helping to push
cycle-sensitive assets higher.
Wednesdays Asia-Pacific Trading Session
Wall Streets rosy session may ring into Asia and help support APAC
stocks and growth-oriented currencies like the Australian and New
Zealand Dollars. Higher-beta FX – particularly those tied to emerging
market economies – may benefit from resilient risk appetite. Credit
markets may continue to show signs of easing as spreads on credit
default swaps on sovereign bond yields in Asia – apart from a few –
continue to narrow.
With another relatively-light data docket, the primary focus will
likely be another Australian-based event, only this time instead of the
RBA – like yesterday – today will focus on Q1 GDP statistics. The
commodity-exporter country has managed to avoid a recession for almost
30 years – even dodging one in 2008. However, the current geopolitical
and economic terrain may now be too rough to traverse unscathed.
AUD/JPY Technical Analysis
In the past 24 hours, AUD/JPY has surged 2.30 percent, adding onto
its remarkable 20 percent recovery after bottoming out at 62.41. The
pair continues to climb above a steep uptrend and is coming close to
retesting a multi-month resistance range between 75.925 and 76.320 where
the pair had previously stalled. Cracking that ceiling opens the door
to testing the lower tier of the 77.736-79.843 range.
The Wall