Risk Taking and JPY Unwinding in Quiet Markets

Following a light calendar in the markets, Monday was a relatively quiet session.  The US Dollar advanced on comments from Fed’s Dudley that he still saw two rate hikes as possible in 2016 despite the weak payrolls data from the US. We saw a little action in the GBP, where Cable printed two-week lows at 1.4375 following weaker than expected Hailfax House Prices. Stock markets in EU were generally positive, less the UK, and in the US, markets were generally bid. The good mood from the US session continued in the Asian session, where Chinese CPI came out in line with expectations and the PPI came out lower than expected, giving an extra boost to the markets. The BoJ has been in focus on concern the recent JPY-appreciation, which has led to JPY-longs unwinding overnight, giving the Nikkei a decent boost, pushing the index above the daily Ichomoku-cloud, indicating that we could be facing a change as the market momentum turning positive. In FX, we saw in general a broad based USD strength.

20160510 - FX Overview

JPN225 daily – from a negative to a positive market outlook?

20160510 JPN225Daily

Today, we could see more sideways trading in FX pairs, given the light macro calendar. This morning, we saw UK trade balance showing a marginal improvement, but as we are getting closer to the Brexit referendum, we expect this slowly to take focus and keep markets in check with a bearish bias. So far, UK markets have kept up well and followed the general market sentiment and recent short term price action still on the bullish side, with fast MAs showing positive momentum. FTSE100 is stuck between the 50- and 100-SMAs and we could see these acting as support/resistance for now. BoE is out later in the week with interest rates and the inflation report, so these could be the trigger for further direction.

UK100 – stuck between 50- and 100-SMAs – range for now until BoE?

20160510 - UK100DailyThe US session is also expected to be relatively quiet with the NFIB Small Business Optimism at 12CET and Wholesale Inventories at 16CET being the highlights on the macro side.

We expect the markets to calm down ahead of the major macro events from the middle of this week coupled with monetary input from Fed speakers George, Mester, Rosengren and Williams and from the ECB, VP Constancio will be hitting the wires a number of times.

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Posted on May 10, 2016 Posted in Uncategorized
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