All the major Asian indices are trading on a positive note on Monday. Gold remains well supported above $1270 marks and hovers around key resistance at $1277. On the other side, Japan released PPI data with negative numbers and Japanese Yen falls in early Asian hours. USD/JPY is currently trading around 108.95 marks.Seemingly benign conditions in FX markets mask some important developments over the last month. Notably high yield EM and commodity currencies have quickly handed back gains made earlier this year. That seems appropriate in light of the unresolved timing of Fed tightening and a sense that China is starting to de-emphasize demand-management policies. After the correction, markets sit at major resistance levels and still have not broken through levels.
Price action still shows moderate USD strength after good data last week but lower long US interest rates do not support a large move. The being said globally inflation expectations & growth is still low leading to lower rates. Asia emerging markets remain on the edge with China and dovish local central banks leading to local currency weakness and outflows. Emea and Latam also remain weak as politics and low growth haunt markets. US remains the stronger or the pack and USD should stay supported even with lower long term interest rates.The exception could be JPY on higher real interest rate outlook and price action reflects the fact with range trading. EMEA and Latam emerging markets are weak with politics haunting already weak growth.