Asian Equity Rally Fizzles Away, Keeping the Carry Trades in Check

• JN Convenience Store Sales YoY (Jul) out at 11.7% vs. 4.2% prior.
• UK BoE Minutes: 7-2 to maintain rates in Aug. 1 for cut. 1 for hike.
• EC Construction Orders MoM/YoY (Jun) out at -0.6%/-2.4% vs. -0.2%/-1.1% prior.
• US MBA Mortgage Applications out at -1.5% vs. -1.5% prior.
• CA Leading Indicators MoM (Jul) out at 0.0% vs. 0.1% expected.
• CA Retail Sales MoM (Jun) out at 0.5% as expected.
• CA Retail Sales Less Autos MoM (Jul) out at 1.4% vs. 0.6% expected.
• US DOE/API Energy Storage: Massive build in DOE Crude Oil (9390K), but massive draw in DOE Gasoline (-6202K).
• NZ Visitor Arrivals (Jul) out at 2.1% vs. -1.4% prior.
• JN Merchandise Trade Balance (Jul) out at Y91.1B vs. Y257.5B expected.
• AU New Motor Vehicle Sales MoM/YoY (Jul) out at -3.4%/-4.1% vs. 1.0%/1.4% prior.
• AU RBA Foreign Exchange Transactions (Jul) out at A$300M vs. A$875M prior.
• NZ Credit Card Spending YoY (Jul) out at 3.8% vs. 3.3% prior.

• Swiss August ZEW Survey (Expectations) (09:00)
• Canadian July Consumer Price Index (11:00)
• Bank of Canada July CPI Core (11:00)
• US Aug 16th Initial Jobless Claims (12.30)
• US Aug 9th Continuing Claims (12:30)
• US August Philadelphia Fed. (14:00)
• US July Leading Indicators (14:00)

Market Comments

While the expecting mood for the UK July Retail Sales was decisively gloomy, the actual results earlier this morning gave some slim consolation as the figures released were sufficiently high enough to beat the estimates. Looking at the annualized results, however, the state of UK retail markets still leave plenty of room for improvement, with a sharp drop from May's high of 8.1% to June's 2.2% now being extended into July's 2.1%.

Cable for now has however managed to shrug off yesterday's losses, with the pair's advances this morning rejected just above 1.87. We are eying the 1.8720 level as a key resistance on the upside, a break of which could open the scope all the way to 1.8835 level.

While the sudden dollar strength has seen USDCHF sharply higher with momentum on the upside picking up speed with the break of 1.00-1.04 channel formation giving rise to 6-figure gains in the last 3-weeks. With the risk aversion back in the FX theater, however, and all significant equity rallies proving rather short lived, we see the rejection of the pair around 1.10 mark as a turning point back below 1.0650 area, where a second technical wave up could be in the building, taking the cross above this year's highs.