JPY slides amid stimulus package details
Market Brief
It was another volatile session for the Japanese yen. Speculation is running high as the market tries to guess what the BoJ will actually deliver at Friday’s meeting. Looking at USD/JPY over the last two days, we clearly see that the market has absolutely no clue as to what the BoJ’s next move will be. However, Prime Minister Shinzo Abe has given more information about the fiscal stimulus his government is planning to implement. At this point, there will apparently be a 28 trillion yen (USD265 billion) package, aimed at propping up the economy. More details will certainly follow in the coming days. USD/JPY slid as low as 103.99 in the early European session yesterday as market participants anticipated a disappointing announcement from the Japanese central bank. On Wednesday morning, the yen erased those gains and tested 106.5 against the greenback before stabilising at around 105.50.
In the US, the July FOMC meeting will soon commence its final day. We still anticipate that this will be a non-event as the Fed simply has insufficient solid data to support a rate hike in the foreseeable future. The Committee will therefore make some minor changes to the statement. Things will get serious however, at the September meeting. EUR/USD treaded water in Tokyo as it got stuck below the 1.10 threshold. The currency pair is still trading with a negative bias as it tested the bottom of its downtrend channel for a fourth straight day. Currently around 1.0975, a break of the 1.0950 level will leave the road wide open towards the next support that lies at 1.0822 (October 3rd).
Commodity currencies took a hit during the Asian session as most commodity prices kept sliding lower. The West Texas Intermediate fell another 0.23% to $42.85 a barrel, while the international gauge, the Brent crude, was off 0.18% to $44.80 a barrel. Since last Thursday, the WTI lost more than 7% against the backdrop of renewed glut fears. The Australian dollar debasement was also exacerbated by the mixed second quarter inflation report, raising the question of another rate cut from the RBA. Headline CPI came in at 1%y/y, down from 1.3% in the previous quarter, while the trimmed mean gauge printed at 1.7%y/y, stable compared to the first quarter but still below the central bank’s target of 2%-3%.
In the equity market, Asian equity returns were broadly mixed on Wednesday as both mainland and offshore Chinese shares were trading in negative territory. Japan equities recovered from yesterday’s sharp debasement with the Nikkei bouncing back 1.98%. In Europe, futures are blinking green across the screen, pointing towards a higher open.
| Global Indexes | Current Level | % Change |
|---|---|---|
| Nikkei 225 Index | 16708.01 | 1.98 |
| Hang Seng Index | 22055.36 | -0.34 |
| Shanghai Index | 2965.771 | -2.77 |
| FTSE futures | 6688 | 0.14 |
| DAX futures | 10246.5 | 0.68 |
| SMI Futures | 8218 | 0.48 |
| S&P future | 2167.3 | 0.18 |
| Global Indexes | Current Level | % Change |
|---|---|---|
| Gold | 1318.16 | -0.16 |
| Silver | 19.56 | -0.4 |
| VIX | 13.05 | 1.4 |
| Crude wti | 42.82 | -0.23 |
| USD Index | 97.17 | 0.01 |
| Today's Calendar | Estimates | Previous | Country/GMT |
|---|---|---|---|
| SP Jun Retail Sales YoY | - | 2,80% | EUR/07:00 |
| SP Jun Retail Sales SA YoY | 3,60% | 2,30% | EUR/07:00 |
| SW Jul Consumer Confidence | 98 | 98,7 | SEK/07:00 |
| SW Jul Manufacturing Confidence s.a. | 104,4 | 104,8 | SEK/07:00 |
| SW Jul Economic Tendency Survey | 102,9 | 103,2 | SEK/07:00 |
| SW Jun Trade Balance | - | -2.1b | SEK/07:30 |
| SW Jun Household Lending YoY | - | 7,80% | SEK/07:30 |
| EC Jun M3 Money Supply YoY | 5,00% | 4,90% | EUR/08:00 |
| IT Jul Consumer Confidence Index | 109,2 | 110,2 | EUR/08:00 |
| IT Jul Manufacturing Confidence | 102 | 102,8 | EUR/08:00 |
| IT Jul Economic Sentiment | - | 101,2 | EUR/08:00 |
| UK 2Q A GDP QoQ | 0,50% | 0,40% | GBP/08:30 |
| UK 2Q A GDP YoY | 2,10% | 2,00% | GBP/08:30 |
| UK May Index of Services MoM | 0,10% | 0,60% | GBP/08:30 |
| UK May Index of Services 3M/3M | 0,30% | 0,50% | GBP/08:30 |
| UK Jul CBI Retailing Reported Sales | 1 | 4 | GBP/10:00 |
| UK Jul CBI Total Dist. Reported Sales | - | 14 | GBP/10:00 |
| US Jul 22 MBA Mortgage Applications | - | -1,30% | USD/11:00 |
| US Jun P Durable Goods Orders | -1,40% | -2,30% | USD/12:30 |
| US Jun P Durables Ex Transportation | 0,30% | -0,30% | USD/12:30 |
| US Jun P Cap Goods Orders Nondef Ex Air | 0,20% | -0,40% | USD/12:30 |
| US Jun P Cap Goods Ship Nondef Ex Air | 0,40% | -0,50% | USD/12:30 |
| RU Jul 25 CPI Weekly YTD | - | 3,80% | RUB/13:00 |
| RU Jul 25 CPI WoW | - | 0,10% | RUB/13:00 |
| BZ Jun Outstanding Loans MoM | - | 0,10% | BRL/13:30 |
| BZ Jun Total Outstanding Loans | - | 3145b | BRL/13:30 |
| BZ Jun Personal Loan Default Rate | - | 6,30% | BRL/13:30 |
| US Jun Pending Home Sales MoM | 1,20% | -3,70% | USD/14:00 |
| US Jun Pending Home Sales NSA YoY | 3,00% | 2,40% | USD/14:00 |
| US Jul 22 DOE U.S. Crude Oil Inventories | -2000k | -2342k | USD/14:30 |
| US Jul 22 DOE Cushing OK Crude Inventory | -500k | 189k | USD/14:30 |
| BZ Currency Flows Weekly | - | - | BRL/15:30 |
| US Jul 27 FOMC Rate Decision (Upper Bound) | 0,50% | 0,50% | USD/18:00 |
| US Jul 27 FOMC Rate Decision (Lower Bound) | 0,25% | 0,25% | USD/18:00 |
| BZ Jun Formal Job Creation Total | -58700 | -72615 | BRL/19:00 |
| BZ Jun Tax Collections | 98327m | 95219m | BRL/22:00 |
Currency Tech
EURUSD
R 2: 1.1428
R 1: 1.1186
CURRENT: 1.0990
S 1: 1.0913
S 2: 1.0822
GBPUSD
R 2: 1.3981
R 1: 1.3534
CURRENT: 1.3119
S 1: 1.2851
S 2: 1.2798
USDJPY
R 2: 109.14
R 1: 107.90
CURRENT: 105.65
S 1: 103.99
S 2: 99.02
USDCHF
R 2: 1.0328
R 1: 0.9956
CURRENT: 0.9938
S 1: 0.9764
S 2: 0.9685
- S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
Author
Arnaud Masset
Swissquote Bank Ltd
Arnaud Masset is a Market Analyst at Swissquote Bank. He has a strong technical background and also works in the development of quantitative trading strategies.
