Market Daily Update 29.09

Market Movers of the Day

Asia-Pacific

Japanese National CPI at -2.2% YoY in line with expectations

Japanese National CPI EX Food, Energy at -0.9% YoY unchanged from the last reading

Japan Tokyo CPI at -2% worse than expected

New Zealand Building permits lower than expected at 1.7% MoM

Europe

German CPI at -0.3% YoY versus -0.1% expected

Testimony by ECB Chairman Jean Claude Trichet

 

The Overall Sentiment

In the Asia pacific trade sentiment was strongly negative with investors’ worries over growth in Japan and the region as a whole moving equities into the red and the Yen to dip the 88 versus the Dollar, a level not seen since January. The comment from Japanese Finance minister Hirohisa Fuji who stated he is against easy intervention in the Yen exchange rate also gathered attention amid inventors concerns over the negative effects of a stronger Yen on the country’s economy. A worry the CPI data published at the end of the day only confirmed with a fall of more than -2% in core inflation pointing deflationary pressures at play. In Europe opening sentiment was negative with equities selloff in Asia weighing on most European equities and pushing the Dollar higher against its European pears with the Euro trading under 1.46$ and the Sterling under 1.59$.CPI Germany also produced some headwinds for the Euro with a surprise drop of -0.3% YoY against -0.1% expected making a rate hike in the Euro zone seem more remote. Another spotlight event affecting the FX market was the comments made by ECB chairman Jean Claude Trichet outlining the importance of a strong Dollar to financial stability and stating it is still too early to fold out stimulus measures in Europe as the crisis is still not over but that an exit strategy should be implemented at some point in time. Surprisingly as the London session advanced stocks managed to regain losses and end the day in the money. The DAX was up strongly gaining 2.78% and the FTSE advanced 1.64%.In the US positive sentiment continued with all major US indexes closing in the green. In the commodities arena Gold remained under the 1000$ mark and Oil at the 66$ zone as Dollar strength kept Metal and petroleum prices at weaker levels.

The Day Ahead

The London session will be at the centre with the UK GDP due slightly before the opening of the trading session with investors expecting a fall of -5.4% YoY. Any surprise to either side might create volatility for sterling and shake sentiment in Europe. The highly important data will be followed by the publication of the M4 level and mortgage approvals which will reflect on UK lending and housing. In the EU economic, consumer and industrial confidence is due at mid day and will reflect investors’ expectations of growth in the region. In the US API crude inventories publication might push oil higher from its 66$ low if data will surprise for the better or be in line with expectations. The US consumer sentiment will also affect sentiment as consumer spending is perceived as an integral part of US economic recovery. The concluding data for the day will be industrial and manufacturing data from Japan which will reflect on the health of the industry in the world’s second largest economy. Overall positive sentiment from a day before could continue however should economic data will surprise for the worst a risk aversion trade might be sparked and move risk trade lower just as easily as it rebounded.

 

Technical Analysis

GBP/JPY

 

 

 

 

 

 

 

 

 

 

 

After falling rather sharply from the 162 peak the pair has settled above the 140 level rebounding from the 139 support. The RSI indicator bellow and the sharp fall from the 162 level could indicate oversold status for the pair. Hence a rebound to test the bearish trend around the 147 price zone could be expected. A break of above the 147 level would mark the 150-152 level as the next target but is not expected to terminate the bearish trend. A break of the 139 downwards could happened but is expected to have low momentum as the pair has fallen sharply in recent weeks.

 

Support/Resistance

 

 

 

Daily Events

 

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