Yen rose because of profit-taking, while commodity currencies kept falling

December 9, 2014

We see a rebound of majors against the Dollar, though commodity currencies fell as China imports weakened.

Japanese current-account surplus was more than twice of what economists expected. Some positions on shorting Yen have been closed due to profit taking. The depreciation of more than 14% against the Dollar has lasted for 7 weeks, which seems to be exaggerated under normal circumstances. The 14-day RSI has stayed beyond the 70 level since October 30th. A short-term correction may probably happen in the recent trading days.

Although the latest estimate showed a Q3 GDP shrinkage of 1.9%, which is higher than initially calculated, the market started to ignore that the BOJ may introduce further easing policies as they have pledged. The extent of drawback on Dollar Yen may be limited. The rally may restart when the 120 mark support gets confirmed.

The Australian dollar touched a new four-and-half year low on Monday as Chinese imports surprisingly dropped 6.7 per cent year this year in November. The data revealed the biggest trading partner of Australia is suffering from weak international and domestic needs. As we mentioned recently, traders are now speculating a rate cut from RBA. Even though RBA puts more concerns on heated housing market, they may have to make a decision at some point next year, if no relieving news comes from Chinese economy. Aussie Dollar is closing the technical target 0.8150-0.80 area.

The Asian stock markets rallied the most on Monday. The Shanghai Composite surged 2.81% to 3020, a 44-month high. ASX 200 also rose 0.7% to 5373. The Nikkei Stock Average was up 0.1%. The index touched 7-year high 18000 during the session as the weak data increased the speculations of BOJ’s next move. Western stock markets performed weak yesterday, the UK FTSE lost 1.05%, the German DAX declined 0.72% and the French CAC Index was down 1%. The S&P 500 fell 0.73% to 2060. The Dow closed 0.56% lower to 17852, and the Nasdaq Composite Index lost 0.84% to 4741.

On the data front, Australian NAB Business Confidence will be released at 11:30 AEDST. UK Manufacturing Production will be at 20:30 AEDST. At midnight, US JOLTS Job Openings will be released at 2:00. After the upbeat non-farm payroll, the data may also be chilling.

Have a great trading day!

Anthony


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