Aussie and Yen under pressure as markets reverse course

January 15, 2014

A very interesting night which really began yesterday after the worse than expected trade performance out of Japan with the  current account deficit – yes deficit – of 592.8 billion Yen.

Also of note was the retail trade data in the US which was much stronger than expected printing 0.7% ex-autos against 0.4% expected and Fed Governors Plosser and Fisher left the market in no doubt that more taper is coming.

So as a result of the above the Yen weakened against both the US dollar (104.14) and Euro (142.48).

I was short EURJPY from Monday – a position I put on during my show on BTFD – and even though I wasn’t paying attention to the actual Japanese trade data when it was released the price action told me to get out, which I did at 141.21.

As you can see in the 4 hour chart above it was a classic turn which continued overnight although any move toward 143 should find resistance.

Looking directly at USDJPY there is still room for further rallies although the hourlies are very overcooked now so it might not happen today.

104.30 is short term key resistance then 104,93

This also put pressure on the Aussie dollar which slipped back through support at 0.9025 and sits this morning below 90 cents at 0.8962. Gbp is higher at 1.6442.

Ouch – what a reversal for the Aussie dollar. Yesterday we said that the 4 hour charts were overcooked and a reversal to 0.9025 was on the cards but once it gave way a cascade lower began.

Unbelievably the 4 hour chart still suggests some further downside but only if 0.8940/50 gives way today.

Turning to the stock market we see that strength replaced weakness as stocks in the US reversed the previous nights falls as better than expected US retail sales gave hope that the non-farm payrolls really was just a weather related aberration.

Also out was a raft of European inflation measures which hit expectations but Eurowide industrial production printed a much stronger than expected 3% yoy. The monthly number was 1.8% in November which reversed the 0.8% fall the previous month.

So at the close the unrelenting weakness of Monday gave way to strength from the start as the Dow rallied 110 points or 0.68%, the Nasdaq is up 1.69% and the S&P has regained almost all of the pints lost the day before rising 20 to 1,838.

It was a similar story in Europe where night futures weakness gave way to strnegth during the day and by the close the big markets were all in the black. The FTSE rose 0.15%, the DAX was 0.32% higher while the CAC rose 0.25%. In Madrid and Milan stocks rose 0.17% and 0.16% respectively.

Closer to home the ASX overnight the SPI 200 rallied 31 points to 5206 bid.

On commodity markets Gold couldn’t hold $1250 and lost 0.46% to $1242.40. Crude reversed the previous nights weakness rising 0.80% to $92.53 while copper sits at $3.39 for the second day in a row. Corn lost 0.46%, wheat rose 1% while soybeans were 0.92% higher.

On the data front today we get new motor vehicles in Australia an some interesting foreign investment and new loan data in China. In Singapore it’s retail sales and in Japan Machine Orders are to be released. Tonight though sees some big releases with german GDP US PPI and the Fed’s Beige book early tomorrow morning.

Have a great day and good hunting

Greg

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