Asia open: dollar strong, ZAR fuelled contagion risk angst; BoC next in focus - TDS

Analysts at TD Securities offered a review of markets as we enter Asia and noted that the USD continued to rally as major EM currencies came under pressure.

Key Quotes:

"The ZAR (-3.2%) lead the decline as it fell into recession, fueling the angst in emerging markets."

"Commodities came under pressure, with copper (-2.55%) leading the base metals lower, while gold (-0.7%) once again failed to garner a safe haven bid. Even WTI crude oil (-0.7%) shrugged off hurricane-related angst as it bounced off resistance."

"We expect that the BoC will continue to emphasize a gradual normalization with a heavy focus on data dependency, but recent activity data has been encouraging. We look for emphasis on housing market stabilization and strength in exports and expect the communique to have an optimistic tone."

What We're Watching in Markets
 
"CAD enters the limelight with the BoC interest rate decision in what should be a bridge to October. Though we expect a "hawkish hold" a lot is priced into the OIS curve (for October). With NAFTA discussions also set to resume but no clear timeline, the backdrop for CAD remains on shaky footing. We look to fade rallies in the CAD; in USDCAD, we think the fade point lies near 1.3120. Meanwhile, 1.3280 will be notable "trend" resistance. We also like scaling into CADNOK shorts."

"Treasuries will be taking their cues from trade news and corporate issuance ahead of August payrolls. Fed speakers will also remain in focus. Strong fundamentals continue to support crude oil prices, just as momentum indicators fire upside signals on all cylinders. The energy complex has remained insensitive to recent EM angst as of yet, but commodity traders will be keenly watching trade news-flow this week."