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7/1/2014 - The Current Market Sentiment

Discussion in 'Current Market Sentiments' started by fx-recommends, Jan 6, 2014.

  1. fx-recommends

    fx-recommends Content Contributor

    Aug 6, 2008
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    USDJPY is still tracking the yields differential in the money market between US and Japan to be back trading below 105 with UST 10YR yield retreat below 3% with easing of the risk appetite.
    With no major change in the forex market and as expected, Yellen could have senate confirmation voting yesterday to be the successor of Ben Bernanke who will leave his office with the end of this month after moving the first step towards tightening The Fed’s ample of stimulating last month by lowering the Fed’s monthly MBS buying by $5b to be $35b and also its Treasuries buying a month by $5b to be $40b.
    This step directed the market participants’ speculations towards the pace of tapering while cutting by only $10b shows that the Fed is looking cautious in taking this first step which has looked actually delayed from last September and the continuation of this cautiousness can lead to gradual pace of cutting the current Fed’s QE to turn back to be interest rate dependent while there is no fear of inflation upside risks yet with the PCE stands for the third consecutive month lower than the half of the Fed’s target which is 2% yearly and the Fed has referred in a previous statement last year that it has the ability to endure inflation higher than this rate with 0.5% too.
    So, the main event of this week can be this time the Fed’s minutes release which will come out tomorrow to direct the market to a closer discounting to the FOMC Fed’s governors views when they took this decision before the interest to go to the US labor market by the end of the week with the release of US labor report of December which is expected to show unchanged unemployment rate at 7% and adding 195k out of the farming sector as the keys of the Fed’s next step.
    From the other side, we have seen the chief of BOJ Kruoda recently saying 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.
    BOJ is buying currently about yen7tr monthly of JGB by this plan to reach from 60tr to 70tr with the end of this year and it can be boosted further to offset the worrying imposed sales tax hike by 3% to be 8% with the beginning of this financial year which will start with the beginning of second quarter of this year which can face shrinking by 3% because if it as the inability of containing with the negative impacts of this hike can lead to looming consequences of dampening the consuming spending specially, if there is no enough trust to raise the wages by the companies with this depression wave which will face the Japanese economy which have shown recently finally healthy signs of getting out of 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.
    The Japanese Finance minister Aso has mentioned also recently that having another stimulating package is not ruled out and referred to the recent Japanese yen deterioration saying that it 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 while the Japanese yen is suffering from the abenomics policies in Japan which has grown in the third quarter by 1.1% yearly while the market was waiting for 1.6% from 1.9% in Q2.

    USDJPY is now trading around 104.30 below its 200h moving average but still above its 200 4h moving average after failing last week to continue rising over 105.42 to be its next resistance over 105 psychological level and God willing, 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 while going down from here can be met by supporting level at 103.74 which is the lowest level since the Fed’s tapering decision before meeting other supporting levels has been formed at higher bottoms in its ascending way to this current highest rate in the last 5 years at 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

    Kind Regards

    FX Market Strategist
    Walid Salah El Din
    Mob: +20 12 2465 9143
    E-Mail: mail@fx-recommends.com
    #1 fx-recommends, Jan 6, 2014
    Last edited: Jan 6, 2014

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