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20/1/2014 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Jan 19, 2014.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    The gold could spike in the beginning of the week with continued easing of the US treasuries yields made the yellow metal more attractive at this point to break its previous resisting level at 1254$ getting over 1260$ in the first trading hours of the new week which watched further pressure from the greenback on its European rivals currencies drove the single currency closer to 1.35 psychological level and also got the cable back near 1.64.
    While USDJPY managed to go towards 104 after moving in a side way around 104.3 following retreating from 104.90 which capped its recent rebound from 102.84 below 105 psychological level again as the risk appetite could find its way back to the markets after over-extended reaction to Dec US labor report which has come actually mixed but the market has found in it a chance for taking profits sending the US treasuries up driving its yields down by an excessive way sent UST 10YR yield to retreat to 2.83% and USDJPY to 102.84 in the beginning of last week as the report could be interpreted into maintaining of the actual prospects of having a slow pace of cutting the Fed’s QE monthly scale.
    The Fed can find in these recent mixed data about the labor market an excuse to wait before cutting its QE again after its decision last month to reduce its monthly MBS buying by $5b to be $35b and also its Treasuries buying a month by $5b to be $40b.
    The volatile USDJPY which is sensitive to the QE changes and also the market risk appetite could find its way back to have a place over 104 after retreating could gain momentum with breaking of its previous supporting level at 103.74 to reach 102.84 before this rising back which could be fueled by the release of November current account deficit which reached Yen592.8b while the market was waiting for Yen380b.
    While this deficit is still exposed to rise further in these current months ahead of the waited retail sales taxes rising by 3% which will be in act with the beginning of the next fiscal year which will start in the beginning of next April and it is expected to cause shrinking of the Japanese GDP by 3% in the third quarter of this year.
    From another side, the Japanese dependence on importing oil for producing energy since March 2011 earthquake is still fueling its trade deficit while the Japanese yen weakness because of the current implemented the abenomics can drive this deficit to new records.
    The Japanese Finance minister Aso has mentioned recently that same meaning by saying that the recent Japanese yen deterioration is not always positive to the economy which depends on exporting as it is depending also currently on importing oil for producing energy and the weak yen drives the cost of importing higher affecting negatively on the Japanese trade balance since March 2011 Earthquake.
    Aso has mentioned also that having another stimulating package is not ruled out and also the chief of BOJ Kruoda has said the same that it is not ruled out to have further easing step to be added to the current unprecedented ultra wide monetary base of BOJ after its 2 years planed time frame or even before it to support the Japanese economy which has grown in the third quarter by 1.1% yearly while the market was waiting for 1.6% from 1.9% in Q2.
    By God’s will, The markets will waiting for BOJ to know more about its direction before this worrying sales taxes hike which can be offset by taking more easing measures by BOJ which is buying currently about yen7tr monthly of JGB to target widening of its monetary base yearly by yen60tr to yen70tr has been planed to the end initially till then of 2014. As the inability of containing the negative consequences of this new tax hike can dampen the consuming spending specially, if there is no enough trust to raise the wages by the companies with this awaited depressive wave which will hit the Japanese economy has grown in the third quarter by 1.1% yearly while the market was waiting for 1.6% from 1.9% in Q2.
    As the prices are expected to be boosted directly by this new hike and with no wages raising, the demand for consuming can contact again to drive the prices to retreat causing less trust in the business spending.
    While the consumers behavior can make the market reaction more aggressive and volatile by their tendency to consuming in the months before the tax hike and tendency of holding in the months after imposing it.
    The prices have actually shown rebound in the recent months following the implementation of Abe’s cabinet abenomics to drive the Japanese economy out from the persisting deflation which lived under its pressure in the recent 15 years with rising of The National Consumer Price Index from -0.9% yearly in last march to 1.5% in November.

    God willing, USDJPY which could hold around 104.30 recently after forming a lower high at 104.91 can face now in the case of retreating again its recent supporting level at 102.84 whereas it has formed its recent bottom below its 200 4h moving average but breaking its this time can be followed by series of supporting levels starting from 102.49, 102.14, 101.61, 101.12 before the psychological level at 100 which can be followed by other supporting levels at 99.55, 99.08, 97.61 before its higher bottom at 96.55 which came over its previous bottom at 95.71 while rising can be faced again by 105 psychological level before 105.43 whereas it has failed 2 times since the beginning of the new year while getting over it can be met by other resisting levels at 107.16, 108.02, 109.18 which can be followed by 110 before its formed top on 10th of August 2008 at 110.66

    Kind Regards

    FX Market Strategist
    Walid Salah El Din
    Mob: +20 12 2465 9143
    E-Mail: mail@fx-recommends.com
    #1 fx-recommends, Jan 19, 2014
    Last edited: Jan 19, 2014

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