Market Drivers November 17, 2014

USD/JPY takes out 117.00 after weak GDP , but steep drop in Nikkei reverses move
HSBC pushes forecast to BoE rate hike to 2016
Nikkei -2.96% Europe .79%
Oil $75/bbl
Gold $1186/oz.

Europe and Asia:
NZD Retail Sales 1.5% vs. 0.8%
JPY GE GDP -0.4% vs. 0.5%
EUR 17.7B vs. 16.2B

North America:
USD Empire Manufacturing 08:30
USD Industrial Production 09:15

Its been a whipsaw night of trade for USD/JPY as the new week began with the pair first spiking to a fresh multi year high above 117.00 level only to quickly reverse and fall to 115.50 in a bout of profit taking and risk aversion as Nikkei sank by nearly -3%. The culprit for today's volatility was the the horrid Japanese GDP number which printed far weaker than the market forecast.

Japanese preliminary GDP for Q3 was forecast to come in at 0.5% but instead declines by -0.4%. This was the second negative quarter of growth for Japan putting the country into the third technical recession since the credit crunch of 2008. The surprisingly sharp decline in the headline reading was primarily caused by large inventory adjustment as firms tried to liquidate old stock.

Japan's economic results going forward should be more positive, as the country's producers will enjoy sharply lower exchange rates and much leaner inventory levels allowing them to increase production into the year end. Nevertheless, the massive downside surprise spooked investors who bailed out of the Nikkei sending it to the worst one day loss in more than three months.

The risk aversion flows also whipsawed USD/JPY longs. The pair took out the 117.00 figure on hopes that PM Abe will delay the second part of the sales tax hike in light of such weak overall demand, only to crash 150 points in less than an hour as selling in the Nikkei overwhelmed the FX market.

Mr. Abe has not made any final decision on the issue of the sales tax hike, nor has he confirmed the incessant rumors about a snap election, but given the very weak results of Q3 GDP the market is pricing in this scenario, so any formal announcement this week may only have a limited impact on the pair.

Elsewhere, cable also saw a big reversal as it dropped more than 100 points off the Asian session highs after several UK banks including HSBC and Barclay's pushed out their forecasts for the start of tightening by the BoE. HSBC revised its estimate all the way to 2016 predicting that the UK central bank will remain stationary for all of next year.

Such analysts reports typically come at the end rather than the beginning of the move which is why cable is unlikely to see much additional weakness from this dynamic. The pair has been heavily sold over the past month and is now coming into strong support at the 1.5500 level which should provide it with a modicum of stability.

In North American session today the focus will be in Empire and Industrial Production numbers as well as Mr. Draghi's speech to the EU Parliament. If US data proves to be positive and if Mr. Draghi once again hints at the prospect of QE the EUR/USD could see further losses as the day proceeds. After a massive short squeeze on Friday that took it above the 1.2500 figure, the pair could resume its downward path if the market once again begins to appreciate the policy divergence between the two regions.   

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD recovers further toward 0.6800 on risk-recovery

AUD/USD recovers further toward 0.6800 on risk-recovery

AUD/USD extends recovery toward 0.6800 in Asian trading on Thursday, despite mixed Australian employment data. The Aussie cheers a return of risk appetite, which weighs on the post-Fed US Dollar recovery. All eyes now remain on US economic data for fresh impetus. 

AUD/USD News
USD.JPY reverses sharply from 144.00, as US Dollar recovery fizzles

USD.JPY reverses sharply from 144.00, as US Dollar recovery fizzles

USD/JPY is attacking 143.00 in Thursday's Asian session, reversing sharply from 144.00. The pair pares back gains in tandem with the US Dollar, as the latter's post-Fed recovery falters due to a rebound in risk sentiment. The focus is next on the US data due later today and Friday's BoJ decision. 

USD/JPY News
Gold price regains positive traction amid a modest USD pullback from one-week high

Gold price regains positive traction amid a modest USD pullback from one-week high

Gold price attracts some dip-buying during the Asian session on Thursday and seems to have stalled its retracement slide from the $2,600 mark, or a fresh all-time peak touched the previous day. The US dollar trims a part of its intraday gains to a one-week high, which turns out to be a key factor lending support to the commodity.

Gold News
Crypto leaders and Congress blast SEC over crypto regulations

Crypto leaders and Congress blast SEC over crypto regulations

In a meeting on Wednesday, several crypto leaders and congress members debunked the Securities and Exchange Commission's harsh regulatory approach toward the crypto industry.

Read more
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures