JPY squeezed post-GDP, Antipodeans better bid

Market Brief

The week starts with bad news out of Japan. Japanese economy unexpectedly entered recession amid 3Q preliminary GDP reading showed 1.7% q/q annualized contraction (vs. 2.2% exp. & previous -7.1% revised down to -7.3%). The impact of April’s sales tax hike has been heavier than anticipated on the Abenomics. The PM Abe is shortly expected to delay hike in sales tax and announce snap elections in December. USD/JPY and JPY crosses took a dive in Tokyo, Nikkei stocks started the week -2.96% lower. USD/JPY hit the fresh high of 117.05 before tumbling to 115.46 post-GDP. Once the negative GDP digested, the anticipation for more growth supportive measure should continue giving support to JPY-crosses. Option bids are seen at 115+. More support is given at 113.86/112.45 (Nov 3th low / Nov 10th low). On a similar pattern, EUR/JPY advanced to fresh year of 146.53 before correction.

Released on Friday, the US retail sales data surprised on the upside in October release. The headline retail sales grew 0.3% on month (vs 0.2% exp. & -0.3% last), retail sales ex-autos and gas surged 0.6% m/m (vs. 0.4% exp. & -0.1% last). EUR/USD shortly tested 1.2400 bids and rebounded to close the week at 1.2525, sending MACD in the green zone. The short-term technicals now hint at deeper upside correction. Resistance is seen at 1.2688/97 (50-dma / daily Ichimoku base), then 1.2744 (Fibonacci 23.6% on May-November drop). EUR/GBP tests 0.80 resistance. With strengthening bullish momentum, the focus shifts to 200-dma (0.80573).

The antipodeans were well bid at the start of the week. Australia-China Free Trade Agreement gave support to AUD overnight. AUD/USD extended gains to 0.8796, NZD/USD remained well bid above the 50-dma (0.7923). The broad based JPY strength post-Japan GDP somewhat curbed the appetite. Combined to global sentiment still USD-positive, the upside attempts will likely remain limited. NZD/USD offers are eyed at 0.8000/0.8034, AUD/USD resistance is seen at 0.8870/90 (Fib 38.2% on Sep-Nov drop / daily Ichimoku base).

EUR/CHF trades at the tight range of 1.20115/1.20185. As selling pressures continue 10 pips above the critical 1.20-floor, traders stand ready for an SNB intervention. Large option barriers are placed at 1.2030 for today expiry.

The weakness in oil markets continue. The WTI crude opens the week 1.15% lower after hitting $73.25 on Friday; the Brent traded at $76.76 and closed the week slightly higher on speculation that OPEC may be tempted to cut production if prices remain below $80. USD/RUB rallied to 47.8754 on Friday as Russian President Putin said to consider and to admit all scenarios including “catastrophic fall of prices for energy sources”. Trend and momentum indicators in USD/RUB are comfortably positive, pressures on 48/50 offers should remain tight.

Today’s economic calendar: Swedish October Unemployment Rate, Norwegian October Trade Balance, Euro-zone and Italian September Trade Balance, Canadian September International Securities Transactions, US November Empire Manufacturing, Canadian October Existing Home Sales, m/m, US October Industrial Production and Capacity Utilization and US October Manufacturing (SIC) Production.