Article / 07 April 2016 at 7:00 GMT

Morning Markets: 108.50 hoves into USDJPY view

Former managing editor, TradingFloor.com / Saxo Bank
Denmark

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Watchlist

  • Ireland CPI (1000 GMT)
  • US Unemployment insurance weekly claims (1230 GMT)
  • US: Initial Jobless Claims                                                (1230 GMT)
  • Mario Draghi speech (1230 GMT, approx.)
  • US: Bloomberg Consumer Comfort Index                       (1345 GMT)
  • US EIA weekly natural storage report (1430 GMT)
  • Japan balance of payments (2350 GMT)

Japanese prime minister Shinzo Abe may have come out earlier this week against intervention in the strengthening yen but a fresh push below 109.00 for USDJPY capped any headwind the Nikkei might have hoped for from a rise in oil prices. Brent crude climbed above $40/barrel in the Asian session.

Japan's currency strength is a real headache for policymakers as exporters cry wolf at their shrinking profit margins and, notwithstanding Abe's stand, Bank of Japan governor Haruhiko Kuroda said it would take more easing action if necessary. It may not do much good though.

USDJPY hit an Asian session low of 108.765 after the dollar failed to take any momentum from the release of the Federal Open Market Committee minutes from last month's meeting. We had posited a week ago 'Is the Fed at war?' and the minutes indicate that April was indeed on the agenda for a rate-hike move. The overall tenor was cautious nevertheless and a move this month on interest rates has been virtually priced out at just 3%.

What then can re-anchor the dollar in calmer waters? It certainly can't expect a hand up from the Republicans where nominee Ted Cruz's momentum is threatening to throw the party into a summer of chaos as an error-strewn fortnight for Donald Trump has his controversial platform teetering. That context can't be good news for the dollar. The euro ahead of a speech today from European Central bank president Mario Draghi was able to pin the greenback for a 1, 2, 3 submission above the 1.1440 area, USDNCH was sinking below 6.48 and even Brexit-laden GBP fancied its chances to edge higher. 

Talking of Brexit, UK prime minister David Cameron has courted controversy by throwing his weight behind a £9.5 million, 16-page leaflet campaign to land on every doorstep in Britain. The Brexiters have predictably cried foul and some of the facts presented in the glossy brochure are already in dispute. We've only got another 77 days of this to go.

Market signals

Asian session

  • The US dollar extended its losses in Asian trade
  • The MSCI Asia Pacific Index (minus Japan) was up 0.11% at 0511 GMT
  • Worries about the rising yen and dovish FOMC minutes weighed on sentiment in Tokyo
  • The Nikkei 225 crept higher in late trading; it was up 0.05% to 15,722.75 at 0458 GMT
  • Japan’s Topix 100 index edged up as well; it was up 0.17% at 0501 GMT
  • China's Shanghai Composite was down 0.79% to 3,026.37 at 0515 GMT
  • Hong Kong's Hang Seng was up 0.15% to 20,236.21 at 0522 GMT
  • Crude rose above $38/barrel after jumping 5.2% overnight
  • Spot gold fell 0.6% to just $1,223/oz overnight as a result of global equities rallying
  • Iron ore lost 0.3% to close at $54.57/tonne overnight
  • The S&P/ASX was up 0.21% to 4,956.40 at 0516 GMT
  • ASX-listed steel maker Arrium went into voluntary administration
  • The move is another signal of the demise of heavy industry in Australia

Forex ahead

  • The rise of the yen against the USD looks unstoppable, with Tokyo reluctant to intervene
  • USDJPY FX Option spreads in 1-3week range increaingly popular
  • Two week 25-delta reversal shifted from vol diferential of 0.4% to 1.6%
  • EURUSD stretching towards 1.1450 with 1.1500 in sight
  • Oil-price rally lifts commodity currencies, including the Australian dollar
  • The Aussie dollar was worth 0.7617 at 0511 GMT

From the Floor

QE redux? ”The market is really pushing hard for some kind of BoJ action,” says Horchani

Up/down.“Crude oil is back to testing resistance this morning after yesterday’s 4% to 5% jump,” says Hansen


Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1...2...3
The renewed move to shift assets into German government debt is a sign that macro worries are still a concern in Europe, says James Picerno.

Energy surge
All across the globe the surprise fall in US oil reserves has given energy stocks the fillip they have been waiting for, says Saxo Capital Markets

Oil's direction
The Doha deal looked dead in the water, but Kuwait's revival of hopes yesterday along with a surprise fall in the API oil inventory helped spur a crude rebound, writes Ole Hansen

Asia ahead
Equity volatility is quite depressed going into Q2, says Kay van-Petersen, and he has a VIX call that could help you circumnavigate troubled waters, in our Q2 Essential Trades publication.

It's just your fib talking
If you are a fan of fibonnaci strategies, then community stalwart fxtime has some very pertinent tips to help bring your plans to fruition.

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End of an era ... the bleak news about Australian steel firm Arrium is a reminder
that heavy industry is in decline in several Western nations. Photo: iStock

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3y
Martin O'Rourke Martin O'Rourke
This comment has been redacted
3y
Martin O'Rourke Martin O'Rourke
USDJPY is just above the 108.50 mark at 108.53 at 0753 GMT.
3y
Martin O'Rourke Martin O'Rourke
USDJPY has breached the 108.50 level and was at 108.36 at 0901 GMT.
3y
Martin O'Rourke Martin O'Rourke
USDJPY came within a whisker of breaking 108.00 to hit 108.02 in the last 20 minutes. It was at 108.24 at 0952 GMT.

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