Originally published by AxiTrader
Asian stocks and forex rates are opening mostly higher this morning after the surge in US equity markets overnight and the stall in the US dollar rally. Bonds in the US also rallied a little with the US 10 Year T-Note sitting at 2.29% in Asia this morning after opening at 2.35% yesterday.
These moves, while only in their infancy have released the pressure on regional markets and currencies.
But while US market moves have done a lot to lift the pall over the region this morning how Donald Trump's first video as president-elect - on his plans for transition and his first 100 days - will go over across Asia and other emerging markets is uncertain.
Posted on YouTube, Trump laid out the core issues that will shape his early presidency.
Worth noting for Asia and Latin America is that he lead off by saying his term would be guided by a "simple core principle, putting America first".
"Whether it's producing steel, building cars, or curing disease, I want the next generation of production and innovation to happen right here, on our great homeland, America - creating wealth and jobs for Americans" he said.
That suggests some pressure on global trade and the nations that have benefitted as trade barriers came down over the past few decades.
In setting out his priorities, which included energy reform, national/cyber security, regulatory reform, immigration, ethics, and trade he highlighted his plan to withdraw from the Trans-Pacific Partnership (TPP) as his first priority.
Trump said that on Day 1 he will:
"Issue our notification of intent to withdraw from the Trans-Pacific Partnership, a potential disaster for our country. Instead, we will negotiate fair bilateral trade deals that bring jobs and industry back onto American shores".
None of that is particularly new.
And a withdrawal from the TPP, to be replaced by bilateral trade deals does ameliorate some of the extreme pessimism that has gripped Asia over the past week. But there is a clear signal that a Donald Trump presidency is likely to be the very protectionist presidency that emerging market nations have feared.
The question for traders, central banks, and governments who have been fighting the sharp rally in the US dollar over the past week is whether the negatives are already baked into the cake - into forex rates.
Short term the answer is probably yes. But the longer term outlook for the US dollar on a multi-month and multi-quarter basis is for continued dollar appreciation.
USD/JPY's fall from around 111.20/30 prior to this morning's earthquake and associated tsunami warnings, is consistent with the experience of repatriation and yen strength after the last Fukushima earthquake. But today's USDJPY dip, and US weakness in other parts of the forex landscape suggests it is time for the big dollar to consolidate. That's certainly something we are seeing this morning in Asian forex.
So for now we can focus on improved equity market sentiment and a slight pullback in the US dollar as a pressure release for the region. That's certainly something we are seeing this morning in Asian forex.
Here's the region's currency levels at 8.36am Beijing/Singapore time.
And, Asian Market Chart of the Day - Waiting for USD/SGD to fall back to earth
As I noted yesterday the USD/CNY chart certainly looks like it has respected the upper lifts of the uptrend I highlighted in yesterday's Asian chart of the day. That's the first indication that the dollar is turning in Asia. USD/JPY, even allowing for the earthquake is a potential second indication, while the Singapore dollar is one I'm also watching for further confirmation.
As break of 1.41 would be the first sign of a deeper retracement to 1.4120 and if that breaks 1.4050 which is where my fast moving average currently resides.
Have a great day's trading