Asian Open: USD/JPY Hits a 3-Year High Ahead of Japan’s Trade Data

The USD extended its post-CPI gains due to strong retail sales data, with only GBP slightly outperforming it as bets are now on for BOE to hike in December.

Charts (2)

The pound was a top performer, rising against all its major peers

 

Asian Futures:

  • Australia's ASX 200 futures are up 19 points (0.26%), the cash market is currently estimated to open at 7,439.40
  • Japan's Nikkei 225 futures are up 60 points (0.2%), the cash market is currently estimated to open at 29,868.12
  • Hong Kong's Hang Seng futures are down -48 points (-0.19%), the cash market is currently estimated to open at 25,665.78
  • China's A50 Index futures are down -42 points (-0.27%), the cash market is currently estimated to open at 15,565.01

 

UK and Europe:

  • UK's FTSE 100 index fell -24.89 points (-0.34%) to close at 7,326.97
  • Europe'sEuro STOXX 50 index rose 15.3 points (0.35%) to close at 4,401.49
  • Germany's DAX index rose 99.22 points (0.61%) to close at 16,247.86
  • France's CAC 40 index rose 23.97 points (0.34%) to close at 7,152.60

 

Tuesday US Close:

  • The Dow Jones Industrial rose 54.77 points (0.15%) to close at 36,142.22
  • The S&P 500 index rose 18.1 points (0.39%) to close at 4,700.90
  • The Nasdaq 100 index rose 120.653 points (0.75%) to close at 16,309.77

 

Strong retail sales in the US saw indices move back towards their record highs a consumers defined any gloom apparent in a recent consumer sentient report. The Nasdaq 100 was a top performer as it tracked yields higher, with futures markets for Japan and Australian pointing towards a firmer open.

 

Dollar buying shows no immediate signs of abating.

We’re in one of those macro moves that comes once or twice a year where momentum makes a mockery over the word “overbought” or “oversold” as markets move seemingly in a straight line. And a stonking retail sales report certainly helped the dollar, as consumers looked past any concerns they may have about their finances suggested in Friday’s Michigan Consumer Sentiment Index. The US dollar index is trading just shy of 96.0, although take note of the resistance cluster in the area which includes the upper trend channel. The euro is seemingly headed for 1.1300 and now sits at its lowest level since July 2020, but if it holds above 1.13 then we’d expect the dollar index to stall around 96 (even if only temporarily).

 

UK employment all but confirms a BOE hike in December

Well, against the British pound at least. Yesterday’s employment report for the UK revealed that the employment situation held steady despite the furlough scheme ending in September, with around 1 million people still on it. As this was a key concern for BOE, and the reason they had not raised rates at their last meeting, bets are now on for them to raise rates at their next meeting in December.

The pound was a top performer, rising against all its major peers. GB/NZD was the strongest cross, GBP/CHF hit a 2-week high and retested 1.2500 and EUR/GBP fell to a 2-day low.

 

We’re ‘flagging’ USD/JPY at its 3-year high

USD/JPY hit a 3-yearr high yesterday after breaking out of a bull flag pattern

Rising yields (and relative differentials) have continued to support USD/JPY, which traded to its highest level in over 3-year overnight. We can see on the daily chart that the false break below 113.0 marked its corrective low and yesterday’s range expansion day saw it break out of a flag formation / corrective channel. This also means that momentum has realigned with the strong bullish move preceding the flag, so out bias remains bullish above 113.78 (but prices should hold above yesterday’s low if this is in fact a flag breakout).

 

Wage growth in focus for RBA watcher

There’s little hope of any fireworks today, given the RBA’s overtly dovish stance, but a rise in wages is a key ingredient the RBA want to see (alongside high inflation) to get the hawkish balls rolling. So traders will keep an eye on Australia’s wage growth at 11:30 AEST.

But first, trade data from Japan and machinery orders are released at 10:50. Given growth was worse than expected this week then BOJ would like to see exports and machinery orders excel. Anything short of that simply points to weaker growth in Q4.

 

Precious metals pullback

Gold, silver and platinum are in a corrective phase after their strong gain last week, with all forming bearish engulfing candles at their highs. In some ways it’s a relief as it removes some potential FOMO and perhaps a better entry for bulls to consider reloading as the retracement matures. Platinum is back below $1100, silver has stumbled after failing to hold above $25 and the monthly R1 pivot and gold (arguably the most bullish) has pulled back to $1850 near the monthly R2 pivot. We remain bullish above 1834, which makes a near-term bearish bias but we’d prefer to seek any bullish setups above that level.

 

ASX 200 Market Internals:

Next PLC was  atop performer yesterday on the ASX 200

ASX 200: 7420.4 (-0.67%), 16 November 2021

  • Information Technology (0.18%) was the strongest sector and Materials (-1.66%) was the weakest
  • 1 out of the 11 sectors closed higher
  • 10 out of the 11 sectors closed lower
  • 6 out of the 11 sectors outperformed the index
  • 40 (20.00%) stocks advanced, 150 (75.00%) stocks declined
  • 61% of stocks closed above their 200-day average
  • 47.5% of stocks closed above their 20-day average

 

Outperformers:

  • + 3.71%-Chalice Mining Ltd(CHN.AX)
  • + 2.61%-Virgin Money UK PLC(VUK.AX)
  • + 1.81%-NEXTDC Ltd(NXT.AX)

 

Underperformers:

  • -8.68%-Mesoblast Ltd(MSB.AX)
  • -4.39%-Pendal Group Ltd(PDL.AX)
  • -4.05%-Iluka Resources Ltd(ILU.AX)

 

 

Up Next (Times in AEDT)

Australian wage inflation is released at 11:30 for RBA watcher, but Japan's trade data will also be in focus at 10:50.

 

 

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

  1. Open a Forex.com account, or log in if you’re already a customer.
  2. Search for the pair you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.