Japan mixed trade numbers and Yellen lift USDJPY

25 May, 2015

It’s been a relatively quiet start to the week in Asia, at least when compared with all the action in the North American session on Friday. Fed Chair Yellen stated on Friday, in prepared remarks for a speech in Rhode Island, that she expected the central bank to raise interest rates this year as the US economy bounces back from a slothful start to the year. This resulted in a push towards the US dollar as the market brought forward its tightening expectations.

Extract from Yellen’s prepared remarks:

• “… if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target”

The US dollar has strengthened even more in Asia, with USDJPY breaking resistance around 121.60. It’s worth noting that we’re expecting some thin conditions in the market today, with German, French, UK and US markets offline; thin markets can create somewhat unpredictable and volatile price action.

The only headline piece of economic data out of Asia this morning comes from Japan. A stronger than expected performance from exporters last month helped to prevent a massive blowout in Japan’s April trade balance. The market was expecting Japan to book a trade deficit of 351.1bn yen, after registering a revised 227.4bn surplus in the prior month – Japan’s first monthly surplus since June 2012. Yet, an 8.0% y/y rise in exports (expected 6.0%) helped to keep the deficit to a modest 53.4bn yen.

The other side of the trade equation in Japan is much more concerning. Imports fell 4.2% y/y last month, missing an expected 1.1% fall. While this is a significant improvement over the prior month’s 14.5% y/y decline in imports, it still highlights some weakness in Japanese domestic demand. This may be why the yen is softening on the back of today’s trade numbers.

USDJPY

USDJPY is now very near an important long-term resistance zone around 122.00, its highest level since 2007. While we think USDJPY may not have the legs to break through this level in these thin market conditions, there’s a lot happening this week that could move either currency – US core durable goods, consumer confidence and GDP data, as well speeches from Fisher and Lacker and Japanese CPI numbers. Above 122.00, the next key levels for price are around 124.15 and then 125.80.


Source link  
Markets turn focus towards Trump address to Congress

On the evening of Tuesday, February 28th, US President Trump is slated to give a major address to a joint session of Congress in lieu of the usual State of the Union address...

FOMC meeting minutes signal rate hike fairly soon – dollar unimpressed

The minutes from the most recent FOMC meeting three weeks ago – the first such meeting since Donald Trump’s presidential inauguration – were released on Wednesday afternoon...

Crude oil look set to resume bullish trend

Oil prices have been coiling for several weeks now with both contracts spending most of their time in a tight four dollar range...


US stocks could rise 6-7% further before potential crash

The US stock markets hit repeated new record highs last week. The positive sentiment has continued at the start of this week, with Asian and European markets drifting higher in an otherwise quiet day. US index futures point to further gains at the open later on...

Fed gives little indication of interest rate trajectory

The Federal Open Market Committee (FOMC) meeting has come and gone, and little has changed in the financial markets as a direct consequence. In unanimously deciding to keep interest rates unchanged, as widely expected...

Surging equities at risk ahead of earnings season

While earnings season has started on a very positive footing, however, banks and other financial companies were already expected to shine more than others due to rising interest rate expectations. As non-financial companies begin to report in the coming weeks...


Gold rebound heading for major resistance

For more than two weeks, the price of gold has been in a strong rebound from its late-December bottom around the $1125 level. This rebound follows a sustained drop in price that began from the July highs around $1375 and followed-through to the December lows...

Crude oil at higher plateau ahead of US inventory data

Crude oil prices have recently been lifted to year-to-date highs on a successful agreement to cut oil production and control supply among major OPEC and non-OPEC oil producers...

Gold rebounds off key level ahead of busy week

As we reported the possibility on Friday of last week, gold did indeed fall further lower this week. The rising dollar, yields and US equity prices all weighed on the appeal of the buck-denominated, noninterest-bearing and perceived safe-haven precious metal...

  


Share: