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Where the world is at. November 16, 2021

US & China

Biden informed China that the US would stand up for its interests and principles with its friends. 

The US opposes unilateral moves to change Taiwan’s status quo. 

Biden highlighted worries about China’s behavior in Xinjiang and Hong Kong.

The US will remain committed to the ‘One China’ policy Biden and Xi talked about taking steps to address the global energy supply. 

The message is far different from China’s view that the “US does not support Taiwan’s independence.” The US makes no clear note of it here, which highlights two distinct versions of the tale – as is generally the case between the two anytime we see these types of encounters (think back to trade).

UAE

Suhail Al Mazrouei, UAE Energy Minister, made these remarks during an interview in Abu Dhabi, where he is attending the ADIPEC oil and gas conference. 

On the existing expected increase in daily output of 400,000 barrels per month, he stated, “And that should be adequate.” The oil market will transition from a supply shortfall to a surplus early next year, which is one of the key reasons why OPEC+ is not acting more aggressively. Saudi Energy Minister Abdulaziz bin Salman backed up his claims.

Malaysia

According to Morgan Stanley, Malaysian semiconductor production units are operating at full capacity. As a result of the “The scarcity of auto, chips is now a thing of the past. The chip scarcity should be gone, and together with the improvement in Malaysian chip output in October, vehicle manufacturing and cloud data center server shipments should improve. Toyota is pleased with the news.

New Zealand and Japan

The NZD/JPY is interesting for three reasons. 

One: the fundamentals point to the New Zealand currency strengthening versus the Japanese yen.

The Reserve Bank of New Zealand (RBNZ) manages high inflation and high employment using a fairly basic strategy. The RBNZ has the highest crash rate among global central banks and is ready to raise rates further. The RBNZ forecasts that it will peak at 3.0 per cent in 2023, up from 2.0 per cent before. The Bank of Japan is unlikely to hike interest rates anytime soon. Some believe the JPY carry trade has returned. Fundamentally, all of this favors the NZD/JPY’s upside.

China

Two: technical soundness 

On the daily NZD chart, the 80.20 zone appears to be well sold as a solid swing low target near core support. Stops can be put immediately below 79.00 while remaining officially out of the way. 

Three: seasonally consistent 

The seasonals for the NZD/JPY pair are fairly strong. The NZD/JPY pair has increased nine times out of ten in the previous ten years. 

The highest increase occurred in 2016, with a nearly 5% increase. The assumption going into the RBNZ meeting is that the RBNZ would continue to hike interest rates. This should keep the NZD/JPY pair supported ahead of the November 24 expiration date. 

Rest:

The dollar is still in good shape, but any future gains will most likely be determined by today’s US retail sales report. On the whole, though, the greenback remains the clear favorite from a technical standpoint. 

Bond yields rose sharply after a cautious start yesterday and are still high today, despite a minor decline. For the time being, 10-year Treasury rates are hovering slightly over 1.60 per cent. 

That will be one per cent in the case of USD/JPY as the price begins to surge again towards the year’s highs.

The AUD/USD attempted an upside move yesterday, but buyers came short of solidly breaking the 100-day moving average. Thus that remains a significant upside level to monitor (now at 0.7363) with the 200-hour moving average (now at 0.7367). 

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