S&P 500, Crude Oil Prices Beyond 14-Month Low. AUD, NZD at Risk

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Asia Pacific Market Open – S&P 500, Canadian Dollar, Crude Oil, Japanese Yen

  • Sentiment relief in Asia trade fell apart, S&P 500 closed at its lowest in more than 14 months
  • Crude oil prices weakened by market mood, reports of more US inventories. CAD fell apart
  • New Zealand Dollar gains on business activity outlook may be in in vain, AUD also at risk

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The sigh of relief from Monday’s Asian trading session following last week’s dismal performance on Wall Street turned out to be only temporary, European shares and then US ones soon quickly plunged. The S&P 500 declined about 2.08%, as prices closed at their lowest in more than 14 months. With less than two weeks left until 2019, this year’s performance is at this point around -5%.

The US trading session offered a couple of disappointing economic data including the worst Empire Manufacturing Index outcome since May 2017 as US homebuilder sentiment declined to its most pessimistic in over three years. US government bond prices rose as traders sought safety and expectations of rate hikes in 2019 declined further.

As such, the US Dollar failed to capitalize on its status as the world’s reserve currency, perhaps reflecting increasing anxiety ahead of this week’s highly anticipated Fed rate decision. The anti-risk Japanese Yen and Swiss Franc did however, climbing against their major counterparts. The majors most in addition to the US Dollar were the pro-risk Australian and New Zealand Dollars.

But the award for the most underperforming major currency has to be the Canadian Dollar, which tumbled with falling crude oil prices and fading 2019 BoC rate hike expectations. Compared to the RBA and RBNZ, the Bank of Canada has more room to lower rate hike forecasts in an environment where expectations of slowing global growth and trade wars are adversely impacting economic projections.

Speaking of, sentiment-linked crude oil prices suffered with risk aversion, undermining expectations of OPEC cutting output and trying to revive the commodity. Reports from Genscape, which provides intelligence on global commodity markets, further hindered crude oil as it noted an increase in inventories from one of the largest American storage hubs.

The Euro, while largely benefiting from weakness in the greenback, trimmed gains after reports crossed the wires from an EU official that no agreement had been reached between the EU and Italy on a budget deal. As Tuesday’s APAC session got underway, the New Zealand Dollar jumped about 0.35% after domestic business activity jumped to its highest since May.

Still, it may be unlikely that the sentiment-linked New Zealand Dollar manages to extend gains on the data given the risks to Asia/Pacific stocks and to general sentiment thereafter. Given the performance on Wall Street, we may see regional bourses echo the pessimism in investors. This would push the Japanese Yen further higher while weighing against AUD and NZD. The Australian Dollar is particularly vulnerable looking at technical signals, especially against the Canadian Dollar.

US Trading Session

S&P 500, Crude Oil Prices Beyond 14-Month Low. AUD, NZD at Risk

Asia Pacific Trading Session

S&P 500, Crude Oil Prices Beyond 14-Month Low. AUD, NZD at Risk

** All times listed in GMT. See the full economic calendar here

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