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Fundamental and Technical Outlook: USD/JPY

By Xinyang August 30, 2016
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Fundamental Outlook: USD/JPY

The main data released during the Asia-Pacific session was Australian Building Approvals which printed above expectations at 11.3% versus 0.0% expected. Despite the positive beat, weakness in commodities resulted in limited upside for AUD. Also during the session we heard comments from Japan PM adviser Hamada calling for the MoF to "courageously intervene to limit JPY appreciation".

There is no tier 1 data due to be released during today's London session.

In today’s session we expect the strongest currency to be USD as positive sentiment from Friday's Fed comments continues to support USD.

The weakest currency is expected to be JPY as comments from PM adviser Hamada may help limit further JPY strength. Furthermore sentiment remains slightly positive with Asian equities overall in positive territory. We will be looking for a positive open in European equities to maintain our view on JPY.

The USDJPY pair is currently priced at 102.14.

There are several levels including the current price level which can be considered for buying opportunities:

The price levels below could be used to buy from as price retraces into them:

102.00, 101.47, 101.00

The price level below could be used to buy from as price breaks out above:

102.60

Source: Jarratt Davis

Technical Outlook: USD/JPY

Indicators: Bullish (50 sma above 200 sma)

Price action: Price is currently in a downtrend for the past 1 year

Summary: I am expecting the price to pull back near to the critical resistance zone before resuming its downtrend, breaking down the critical support level at 100.700.

Screen Shot 2016-08-30 at 3.19.23 PM

Opening Wrap

In Asian Equity Markets stocks bounced on Tuesday as doubts the Federal Reserve really would hike interest rates as soon as September restrained the dollar, while investors continued to count on more policy stimulus elsewhere in the world. MSCI's broadest index of Asia-Pacific stocks outside Japan rose 0.5 percent, recouping around half of Monday's loss. Stocks in South Korea added 0.7 percent and Australia 0.4 percent. The Nikkei was effectively unchanged at 16,740.42 points after falling to 16,677.85 earlier. The broader Topix inched up 0.1 percent to 1,314.35 and the JPX-Nikkei Index 400 rose 0.1 percent to 11,8325.20.

In Currency Markets the dollar edged up on Tuesday, but mostly took a breather as investors waited to see if U.S. employment data later this week would reinforce U.S. Federal Reserve officials' recent hawkish messages. The euro inched 0.1 percent higher to 114.11 yen and was down 0.1 percent against the dollar at $1.1172. The dollar added 0.2 percent to 102.14 yen, moving back toward Monday's high of 102.39. The dollar index added 0.2 percent to 95.714, though it remained shy of the previous session's high of 95.834 which was its highest since Aug. 12. U.S. economic data on Monday showed consumer spending increased for a fourth straight month, pointing to a pickup in growth that could pave the way for the Fed to raise interest rates later this year.

In Commodities Markets oil  futures edged up on Tuesday as the U.S. dollar backed off a two-week high hit the day before, although doubts that crude producers would agree next month to an output freeze continued to drag on prices.  Brent crude futures were trading at $49.38 per barrel, up 12 cents from their previous close. U.S. West Texas Intermediate crude was up 17 cents at $47.15 a barrel. Gold held steady on Tuesday as investors swooped in after the metal fell to near five-week lows. Spot gold was little changed at $1,323 per ounce. Silver fell 0.6 percent to $18.84 an ounce. It hit a two-month low of $18.36 on Monday. Platinum and palladium were little changed at $1,071.60 and $695.08, respectively.

In US Equity Markets  financial and commodity-sector stocks led the S&P 500 higher in a low-volume session on Monday after consumer spending rose for a fourth straight month, pointing to a pick-up in U.S. economic growth. The S&P 500 gained 0.52 percent, to 2,180.38 and the Nasdaq Composite rose 0.26 percent, to 5,232.33. Apple was down 0.1 percent. The company could face over 1 billion euros in back taxes as the European Commission was set to rule on Tuesday against Ireland's tax dealings with Apple. Caesars Entertainment Corp lost 15.7 percent after a U.S. judge cleared the way for billions of dollars in bondholder lawsuits against the casino group to proceed.

In Bond Markets Japanese government bond prices gained on Monday with the market tracking an overnight rise by U.S. Treasuries. The shorter-dated JGB maturities outperformed thanks to steady investor demand for new two-year debt. The two-year yield fell 2.5 basis points to minus 0.210 percent and the benchmark 10-year yield fell half a basis point to minus 0.075 percent. Benchmark 10-year U.S. Treasury prices rose 20/32 in price to yield 1.566 percent. The 30-year Treasury bond rose 1-23/32 to yield 2.216 percent.

Source: Institute of Trading and Portfolio Management

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By Xinyang August 30, 2016
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