Yen Weakens as Treasury Yield Rose
Japanese yen weakens mildly in Asia as Nikkei rise for another day by over 1.5%. Yen is also feeling the pressure of rising treasury yield. 10 year yields jumped to the a 4 month high overnight and closed at 3.682%, taking USD/JPY above 91 level. Dollar also remains firm as gold had another fall with eyes now on 1190 level. Markets are so far quite quiet as traders are looking for the Christmas holiday long weekend.
Aussie weakens mildly against dollar as leading indicators dropped for the first time in five months in October, by -0.3%. AUD/JPY, the carry trade pair, is still stuck in tight range in spite of another day of rebound in Asian stocks. And just like other yen crosses except USD/JPY, AUD/JPY is lacking clear direction. We'd stay slightly favor more downside for the moment as long as 81.93 resistance holds. But a break there will strongly suggest that rise form 76.54 is resuming for another test on 85.30 high.
Looking ahead, German Gfk consumer sentiment, Swiss trade balance and UK Q3 GDP final will be released in European session. US Q3 GDP final will also be featured in the US session too. But market will be more interested in existing home sales figure in November.
USD/JPY Daily Outlook
Daily Pivots: (S1) 90.53; (P) 90.88; (R1) 91.52; More.
USD/JPY's rally is still in progress and reaches as high as 91.49 so far today. Intraday bias remains on the upside for the moment and current rise is still expected towards 92.31 resistance next. Break there will target 100% projection of 84.81 to 90.75 from 87.36 at 93.30. On the downside, below 90.24 minor support will turn intraday bias neutral first and turn focus back to 87.36 support.
In the bigger picture, as noted before, there is no clear indication of medium term reversal yet as USD/JPY is still trading well below 55 weeks EMA (now at 94.54) as well as the trend line resistance at 94.44. Whole down trend from 124.13 could still be in progress and might extend towards 1995 low of 79.75 after completing the rebound from 84.81. However, note that sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.
Asian Market Update
Nikkei225 rises to 2-month highs on weak Yen, as Japanese automakers continue to turn the corner of recovery; Hawkish comments from PBOC Gov Zhou sinks Shanghai
ECONOMIC DATA
(NZ) New Zealand Q3 Current Account Balance: -NZ$1.4B V -NZ$2BE (largest deficit since Q4 2008)
(AU) Australia Oct Conference Board Leading Index: -0.3% v 0.3% prior (first decline in 5 months)
(JP) Japan Nov Supermarket Sales -8.0% v -5.2% prior
(JP) Japan Dec Small Business Confidence: 40.4 v 43.0 prior
SPEAKERS/PRESS
Asian equity markets are trading to the upside in a near-unanimous fashion, with a fresh dose of dollar strength benefiting the export-heavy sectors across the board. Going into Tokyo session close, Nikkei225 is leading the way with a 1.8% gain, as 8-week lows for the Yen help the tech, consumer, and industrial names with substantial overseas exposure. Hang Seng and S&P/ASX are also up over 1%, while the Kospi and the Taiex gained over 0.5%. Shanghai Composite is the big loser for the second consecutive day, falling over 2.5% on hawkish commentary by the PBOC chief Zhou coupled with a downbeat economic assessment from the cabinet banking regulator. Ahead of the Tuesday US session, when much of the attention will focus on the final Q3 GDP print and the latest set of existing home sales, front-month S&Ps look to maintain the bullish sentiment of Monday trading with a 0.8% gain to 1,112.
People's Bank of China Governor Zhou downplayed concerns that the central bank would focus on inflation in its policy objectives, suggesting that economic growth, high employment, and external payments balance are also important. He did however spark profit-taking in Shanghai equities by supporting the use of reserve ratios and the need to soak up excess liquidity. Runaway asset bubble perceptions were also fuelled by commentary outside the cabinet. Chinese lender Vanke's Chairman Wang said his company is prepared for the bursting of a bubble in China's property market, suggesting that and prices in Beijing and Shanghai are like prices seen in Japan before the collapse of Japan's property market. China Communications Bank chief economist Lian Ping also noted that monetary policy will likely need to be shifted to 'appropriately tight' policy next year from 'appropriately loose' conditions this year. Meanwhile, China Banking Regulator Wu said that external demand may remain weak for considerable time, with the end of the financial crisis still not in sight.
Over in Japan, despite the 3-month high Nikkei225 close, Deputy Prime Minister Kan echoed worries over a double-dip recession expressed by the private sector in this weekend's Nikkei poll. Likewise, Japan's Banking Minister Kamei said there was still a need for as much as ¥15T for regional economy relief to be a part of next year's budget, up from the ¥2T recommended by Fin Min Fujii. On the monetary front, Bank of Japan Gov Shirakawa reiterated his commitment to move quickly in order to prevent a deflationary spiral as promised in the most recent policy statement.
Elsewhere in Asia, Singapore Manpower minister said unemployment is likely to lag economic recovery, remaining high even as other economic metrics improve. In Philippines, central bank governor Tetangco noted that sluggish global growth poses a challenge to domestic economy, but reaffirmed 2009-10 inflation targets. In Thailand, central bank's Tarisa suggested that inflation is not a concern at this time, and a policy tightening may not be needed if the economy stays weak.
EQUITIES
In individual shares, merger-mania hit the Aussie materials sector, halting trading in several large names. MacArthur Coal was reported to have made a bid for Gloucester Coal, with Australian coal sector becoming increasingly vulnerable after the failure at the Copenhagen summit. Company's Chairman De Lacy, a well-known ally of PM Rudd, was quoted as saying 'Emissions Trading Scheme will erode our competitive position, while it does absolutely nothing to reduce greenhouse emissions', urging the administration to back away from its commitment to the Emissions Trading Scheme. In industrial, NuFarm was suspended from trading after Sinochem cut its offer for the company to A$12/share from A$13. Elsewhere in Sydney, MacQuarie was said to be close to a deal for Sal Oppenheim's derivatives business, BHP denied press speculation that it may sell its remaining nickel assets in 2010 to raise A$3-7B, and GrainCorp FY10 EBITDA guidance in A$180-210M range missed estimates of A$243Me.
Over in Japan, the Big Three auto names posted their most recent monthly output figures, registering another month of faster pace of y/y growth across the board. Toyota global vehicle output rose 22% y/y to 719K autos v +1.4% prior, Nissan output rose +33% y/y (294.6K units) v +10% prior, and Honda pace of decline was slower at -7.6% y/y (301.2K units) v -18% prior. Also on the Nikkei, Hitachi was reportedly added to Goldman Sachs 'Conviction Buy' list, while Toray was placed on review for a possible downgrade at Moody's. Also in industrials, Chiyoda said its 2010 order volume would match or exceed the $4.9B seen in the prior year, and Nikkei's largest contractors - Kajima, Obayashi, Shimizu, and Taisei - were said to face a 14-35% y/y drop in the current year because of sluggish demand. In Tokyo tech, local press saw Toshiba and Elpida planning to raise capital expenditures on early evidence of recovery in demand.
CURRENCIES/FIXED INCOME/COMMODITIES
In currencies, US dollar consolidated further strength seen during the US hours after Fed's Evans pointed to the 'extended period' clause in FOMC statement to mean about 3-4 FOMC minutes. EUR/USD bounced about 40 pips higher but stayed below 1.43, USD/CHF ranged in 1.0450-70 territory, and GBP/USD traded sideways around 1.6060 after falling over 100 pips in US session. In commodity FX, NZD/USD was thin around 0.7040 ahead of tomorrow's Kiwi GDP release coming in the wake of another current account deficit print seen today, while AUD/USD took out 0.88 handle, falling below 100-day MA for the first time since late March. Japanese Yen remained weak across the board amid new commitment to easy stance by the BOJ theme, as USD/JPY rose above 91.40 - the highest level since October 30th.
Spot Gold prices are little changed and consolidating the losses seen during yesterday's NY session (session high: 1,097.42, session low: 1,091.72 as of 12:22 a.m. EST). In NY trading, gold declined by more than 1% and closed below $1,100/oz, as the US dollar moved to a near 3-month high against the Euro. Despite, the recent weakness in gold prices, some funds have used the pullback as a buying opportunity. Earlier today, the SPDR Gold Trust ETF disclosed that its daily holdings increased by 6.1 metric tons and overall the ETF has added a total of 12 metric tons to its holdings in the past 2 sessions. Crude oil prices are little changed and trading near $73.50/bbl ahead of OPEC's decision on production, which will be released later today. The current market consensus is for OPEC to leave its production levels unchanged. During yesterday's US session, the Saudi Arabian oil minister was quoted as saying that OPEC does not need to change output at today's meeting. The Saudi oil minister added that OPEC has still not made any decision about a possible meeting before the next scheduled March meeting. In other commodities, Shanghai Copper prices are gaining, tracking the gains in the LME copper contract
Japanese yen weakens mildly in Asia as Nikkei rise for another day by over 1.5%. Yen is also feeling the pressure of rising treasury yield. 10 year yields jumped to the a 4 month high overnight and closed at 3.682%, taking USD/JPY above 91 level. Dollar also remains firm as gold had another fall with eyes now on 1190 level. Markets are so far quite quiet as traders are looking for the Christmas holiday long weekend.
Aussie weakens mildly against dollar as leading indicators dropped for the first time in five months in October, by -0.3%. AUD/JPY, the carry trade pair, is still stuck in tight range in spite of another day of rebound in Asian stocks. And just like other yen crosses except USD/JPY, AUD/JPY is lacking clear direction. We'd stay slightly favor more downside for the moment as long as 81.93 resistance holds. But a break there will strongly suggest that rise form 76.54 is resuming for another test on 85.30 high.
Looking ahead, German Gfk consumer sentiment, Swiss trade balance and UK Q3 GDP final will be released in European session. US Q3 GDP final will also be featured in the US session too. But market will be more interested in existing home sales figure in November.
USD/JPY Daily Outlook
Daily Pivots: (S1) 90.53; (P) 90.88; (R1) 91.52; More.
USD/JPY's rally is still in progress and reaches as high as 91.49 so far today. Intraday bias remains on the upside for the moment and current rise is still expected towards 92.31 resistance next. Break there will target 100% projection of 84.81 to 90.75 from 87.36 at 93.30. On the downside, below 90.24 minor support will turn intraday bias neutral first and turn focus back to 87.36 support.
In the bigger picture, as noted before, there is no clear indication of medium term reversal yet as USD/JPY is still trading well below 55 weeks EMA (now at 94.54) as well as the trend line resistance at 94.44. Whole down trend from 124.13 could still be in progress and might extend towards 1995 low of 79.75 after completing the rebound from 84.81. However, note that sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.
Asian Market Update
Nikkei225 rises to 2-month highs on weak Yen, as Japanese automakers continue to turn the corner of recovery; Hawkish comments from PBOC Gov Zhou sinks Shanghai
ECONOMIC DATA
(NZ) New Zealand Q3 Current Account Balance: -NZ$1.4B V -NZ$2BE (largest deficit since Q4 2008)
(AU) Australia Oct Conference Board Leading Index: -0.3% v 0.3% prior (first decline in 5 months)
(JP) Japan Nov Supermarket Sales -8.0% v -5.2% prior
(JP) Japan Dec Small Business Confidence: 40.4 v 43.0 prior
SPEAKERS/PRESS
Asian equity markets are trading to the upside in a near-unanimous fashion, with a fresh dose of dollar strength benefiting the export-heavy sectors across the board. Going into Tokyo session close, Nikkei225 is leading the way with a 1.8% gain, as 8-week lows for the Yen help the tech, consumer, and industrial names with substantial overseas exposure. Hang Seng and S&P/ASX are also up over 1%, while the Kospi and the Taiex gained over 0.5%. Shanghai Composite is the big loser for the second consecutive day, falling over 2.5% on hawkish commentary by the PBOC chief Zhou coupled with a downbeat economic assessment from the cabinet banking regulator. Ahead of the Tuesday US session, when much of the attention will focus on the final Q3 GDP print and the latest set of existing home sales, front-month S&Ps look to maintain the bullish sentiment of Monday trading with a 0.8% gain to 1,112.
People's Bank of China Governor Zhou downplayed concerns that the central bank would focus on inflation in its policy objectives, suggesting that economic growth, high employment, and external payments balance are also important. He did however spark profit-taking in Shanghai equities by supporting the use of reserve ratios and the need to soak up excess liquidity. Runaway asset bubble perceptions were also fuelled by commentary outside the cabinet. Chinese lender Vanke's Chairman Wang said his company is prepared for the bursting of a bubble in China's property market, suggesting that and prices in Beijing and Shanghai are like prices seen in Japan before the collapse of Japan's property market. China Communications Bank chief economist Lian Ping also noted that monetary policy will likely need to be shifted to 'appropriately tight' policy next year from 'appropriately loose' conditions this year. Meanwhile, China Banking Regulator Wu said that external demand may remain weak for considerable time, with the end of the financial crisis still not in sight.
Over in Japan, despite the 3-month high Nikkei225 close, Deputy Prime Minister Kan echoed worries over a double-dip recession expressed by the private sector in this weekend's Nikkei poll. Likewise, Japan's Banking Minister Kamei said there was still a need for as much as ¥15T for regional economy relief to be a part of next year's budget, up from the ¥2T recommended by Fin Min Fujii. On the monetary front, Bank of Japan Gov Shirakawa reiterated his commitment to move quickly in order to prevent a deflationary spiral as promised in the most recent policy statement.
Elsewhere in Asia, Singapore Manpower minister said unemployment is likely to lag economic recovery, remaining high even as other economic metrics improve. In Philippines, central bank governor Tetangco noted that sluggish global growth poses a challenge to domestic economy, but reaffirmed 2009-10 inflation targets. In Thailand, central bank's Tarisa suggested that inflation is not a concern at this time, and a policy tightening may not be needed if the economy stays weak.
EQUITIES
In individual shares, merger-mania hit the Aussie materials sector, halting trading in several large names. MacArthur Coal was reported to have made a bid for Gloucester Coal, with Australian coal sector becoming increasingly vulnerable after the failure at the Copenhagen summit. Company's Chairman De Lacy, a well-known ally of PM Rudd, was quoted as saying 'Emissions Trading Scheme will erode our competitive position, while it does absolutely nothing to reduce greenhouse emissions', urging the administration to back away from its commitment to the Emissions Trading Scheme. In industrial, NuFarm was suspended from trading after Sinochem cut its offer for the company to A$12/share from A$13. Elsewhere in Sydney, MacQuarie was said to be close to a deal for Sal Oppenheim's derivatives business, BHP denied press speculation that it may sell its remaining nickel assets in 2010 to raise A$3-7B, and GrainCorp FY10 EBITDA guidance in A$180-210M range missed estimates of A$243Me.
Over in Japan, the Big Three auto names posted their most recent monthly output figures, registering another month of faster pace of y/y growth across the board. Toyota global vehicle output rose 22% y/y to 719K autos v +1.4% prior, Nissan output rose +33% y/y (294.6K units) v +10% prior, and Honda pace of decline was slower at -7.6% y/y (301.2K units) v -18% prior. Also on the Nikkei, Hitachi was reportedly added to Goldman Sachs 'Conviction Buy' list, while Toray was placed on review for a possible downgrade at Moody's. Also in industrials, Chiyoda said its 2010 order volume would match or exceed the $4.9B seen in the prior year, and Nikkei's largest contractors - Kajima, Obayashi, Shimizu, and Taisei - were said to face a 14-35% y/y drop in the current year because of sluggish demand. In Tokyo tech, local press saw Toshiba and Elpida planning to raise capital expenditures on early evidence of recovery in demand.
CURRENCIES/FIXED INCOME/COMMODITIES
In currencies, US dollar consolidated further strength seen during the US hours after Fed's Evans pointed to the 'extended period' clause in FOMC statement to mean about 3-4 FOMC minutes. EUR/USD bounced about 40 pips higher but stayed below 1.43, USD/CHF ranged in 1.0450-70 territory, and GBP/USD traded sideways around 1.6060 after falling over 100 pips in US session. In commodity FX, NZD/USD was thin around 0.7040 ahead of tomorrow's Kiwi GDP release coming in the wake of another current account deficit print seen today, while AUD/USD took out 0.88 handle, falling below 100-day MA for the first time since late March. Japanese Yen remained weak across the board amid new commitment to easy stance by the BOJ theme, as USD/JPY rose above 91.40 - the highest level since October 30th.
Spot Gold prices are little changed and consolidating the losses seen during yesterday's NY session (session high: 1,097.42, session low: 1,091.72 as of 12:22 a.m. EST). In NY trading, gold declined by more than 1% and closed below $1,100/oz, as the US dollar moved to a near 3-month high against the Euro. Despite, the recent weakness in gold prices, some funds have used the pullback as a buying opportunity. Earlier today, the SPDR Gold Trust ETF disclosed that its daily holdings increased by 6.1 metric tons and overall the ETF has added a total of 12 metric tons to its holdings in the past 2 sessions. Crude oil prices are little changed and trading near $73.50/bbl ahead of OPEC's decision on production, which will be released later today. The current market consensus is for OPEC to leave its production levels unchanged. During yesterday's US session, the Saudi Arabian oil minister was quoted as saying that OPEC does not need to change output at today's meeting. The Saudi oil minister added that OPEC has still not made any decision about a possible meeting before the next scheduled March meeting. In other commodities, Shanghai Copper prices are gaining, tracking the gains in the LME copper contract
