Yen plunges as market sentiment turned bullish with USD / JPY pressing resistance at 110.44

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Market sentiment changed dramatically overnight with a strong rally in US indices. Nikkei follows in Asia and has recovered a handful of 30,000, but other Asian markets are weak. In particular, the yen fell on the return of risk appetite while the dollar also weakened. In contrast, commodity currencies rebounded significantly. The yen is now the worst performing of the week, followed by the pound sterling. The Swiss franc is the strongest followed by the Canadian. But the picture could change before the weekly close.

Technically, the focus is now on whether the massive sell-off of the yen will continue immediately. In particular, the breakout of the resistance at 110.44 USD / JPY will be a strong sign of a bullish breakout of the range. A further breakout of the resistance of 110.79 would pave the way for a retest of the high of 111.65. Such a development, if it occurs, could be accompanied by a breakout of the resistance of 130.73 in EUR / JPY and the resistance of 152.85 in GBP / JPY.

In Asia, at the time of writing, Nikkei is up 2.01%. Hong Kong’s HSI is down -0.03%. China Shanghai SSE is down -0.07%. Singapore Strait Times is down -0.12%. The Japanese 10-year JGB yield is up 0.0142 to 0.050. Overnight, the DOW rose 1.48%. The S&P 500 rose 1.21%. The NASDAQ rose 1.04%. The 10 year yield increased from 0.074 to 1.410.

Japan manufacturing PMI fell to 51.2 in September, services rose to 47.4

Japan’s manufacturing PMI fell from 52.7 to 51.2 in September, below expectations of 52.5. PMI Services went from 42.9 to 47.4. The Composite PMI also fell from 45.5 to 47.7.

Usamah Bhatti, Economist at IHS Markit, said: “The rate of decline has been slower than that seen in August, as the service sector as a whole saw a significant slowdown in the rate of contraction… Input prices in the private sector have grown at the fastest rate for 13 years. years, companies attributing the rise to higher costs of raw materials, freight and personnel amidst supply shortages.

Also from Japan, the core CPI (all items excluding fresh produce) fell from -0.2% to 0.0% year-on-year in August, which is in line with expectations. The headline CPI (all items combined) fell from -0.3% yoy to -0.4% yoy. Core-core CPI (all items excluding fresh food and energy) improved from -0.6% yoy to -0.5% yoy.

New Zealand: Record monthly trade deficit as imports rise

New Zealand’s merchandise exports fell -0.9% year-on-year to NZD 4.4 billion in August. Merchandise imports increased 38.0% year-on-year to NZD 6.5 billion. The trade deficit stood at a record NZD -2.1 billion, against the expectation of a surplus of NZD 110 million.

Exports to major trading partners were mixed, up 12% to China and 5.9% to Japan, but down -9.1% to Australia, -11% to the United States. United and -12% to the EU. Imports from all major trading partners were up, with China up 40%, the EU up 42%. Australia up 19%, the United States up 15% and Japan up 83%.

“This is a larger than normal deficit due to higher import values, especially vehicles, continuing the trend seen in recent months. August is also the month when we generally see lower values ​​for dairy exports, ”said Director of International Trade Alasdair Allen.

Gfk’s UK consumer confidence fell to -13 in September, with consumers braking sharply

UK consumer confidence for Gfk fell from -8 to -13 in September, with all measures down. In particular, the general economic situation over the next 12 months fell sharply from -6 to -16.

Joe Staton, Director of Customer Strategy at GfK, comments: “Following concerns about rising fuel and food prices, growing headline inflation, tax hikes, empty shelves and the end of the holiday plan, September sees consumers hold back as those already experiencing economic hardship anticipate a potential cost-of-living crisis.

Look ahead

Germany’s Ifo business climate is the main feature today while the US will release new home sales. Attention will also be drawn to the comment by Fed Chairman Jerome Powell, but it is unlikely to deviate from what he said at the post FOMC press conference just two years ago. days.

USD / JPY Daily Outlook

Daily Pivots: (S1) 109.94; (P) 110.14; (R1) 110.54; Following…

The USD / JPY rebound from 109.11 extends higher today and attention is now immediately focused on the resistance at 110.44. The firm break there will argue that the pattern of consolidation from 111.65 may finally be over. A larger rise would be seen to 110.79 to retest the high of 111.65. On the downside, however, the breakout of 109.10 will indicate that a larger drop from 111.65 resumes. A deeper drop should then be seen to 108.71 support first, then a 38.2% retracement from 102.58 to 111.65 to 108.18 thereafter.

Overall, the medium term outlook remains neutral with resistance at 111.71 intact. The 101.18 pattern could expand further with another lower leg. Sustained trading below the 55 day EMA will cause a deeper fall to support at 107.47 and below. Nonetheless, a strong breakout of resistance at 111.71 will confirm the completion of the corrective decline from 118.65 (2016 high). A further rise should then be observed to 114.54 then to 118.65 resistance.

Update of economic indicators

GMT Ccy Events Real Forecast Previous amended
22:45 NZD Trade balance (NZD) August -2144M 110M -402M -397M
23:01 GBP Consumer Confidence GfK Sept. -13 -7 -8
11:30 p.m. JPY National Core CPI Y / Y August 0.00% 0.00% -0.20%
00:30 JPY Manufacturing PMI Sept. P 51.2 52.5 52.7
08:00 EUR Germany IFO Business climate Sept. 100.4 99.4
08:00 EUR Germany IFO Current assessment Sep. 100.8 101.4
08:00 EUR Germany IFO Expectations Sep 100 97.5
14:00 USD New home sales August 708K 708K

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