FOREX: Japanese Yen Outperforms Amid Dented Risk Sentiment
- Major equity benchmarks are softer on Thursday, marginally eroding some of the weekly advance. This dynamic has boosted the likes of JPY and CHF, with lower core yields providing another moderate tailwind to the low yielders.
- For USDJPY, spot broke through the prior session lows in early European trade to print as low as 145.49, however, we note it is yet to close the gap to last Friday’s close at 145.37. This level will remain in short-term focus, before 145.10, the 20-day EMA. Overall, the latest USDJPY pullback underpins the view that gains since Apr 22 appear corrective.
- Underperformance for the higher beta currencies in G10, such as the antipodeans sees the likes of AUDJPY and NZDJPY falling around 0.8% today. For AUDJPY, the prior trendline resistance break now provides solid support at the 93.00 handle, with both the 20- and 50-day exponential moving averages intersecting just below this mark.
- The moderate risk-off tone is having little negative impact on the Euro, allowing EURUSD to rise back above the 1.12 handle on Thursday and broadly consolidate its recovery from its 50-day EMA support. Recent weakness appears corrective and key trend signals continue to highlight an uptrend.
- Stronger-than-expected UK growth data has only provided a modest boost to GBP, with cable hovering just below the 1.33 mark. A continuation higher would refocus attention on the key resistance and a bull trigger, at 1.3444, the Apr 28 / 29 high.
- Focus shifts to the flurry of US data releases, including PPI and retail sales, followed shortly after by an appearance from Fed Chair Powell.
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COMMODITIES: Bearish WTI Theme Intact
The trend condition in Gold remains bullish and price is trading at its recent highs. The yellow metal last week traded through $3167.8, the Apr 3 high, to resume the primary uptrend and trade to fresh all-time highs. A bearish theme in WTI futures remains intact and the rally last Wednesday is - for now - considered corrective. The move higher is allowing an oversold trend condition to unwind. Recent weakness has resulted in the breach of a number of important support levels.
- WTI Crude down $0.04 or -0.07% at $61.46
- Natural Gas up $0.01 or +0.33% at $3.331
- Gold spot up $18.16 or +0.57% at $3228.3
- Copper down $0.85 or -0.18% at $467.5
- Silver up $0.01 or +0.02% at $32.3408
- Platinum up $6.5 or +0.68% at $959.09
EQUITIES: Bounce in Stocks Allows Oversold Condition to Unwind
A short-term reversal higher in S&P E-Minis last week highlights the start of a corrective cycle. The trend condition has been oversold following recent weakness and the move higher is allowing this set-up to unwind. Eurostoxx 50 futures continue to trade above their recent lows. The latest bounce highlights the start of a corrective cycle and if this is correct, marks an unwinding of the recent oversold trend condition.
- Japan's NIKKEI closed higher by 285.18 pts or +0.84% at 34267.54 and the TOPIX ended 24.84 pts higher or +1% at 2513.35.
- Elsewhere, in China the SHANGHAI closed higher by 4.854 pts or +0.15% at 3267.662 and the HANG SENG ended 48.87 pts higher or +0.23% at 21466.27.
- Across Europe, Germany's DAX trades higher by 309.15 pts or +1.48% at 21264.04, FTSE 100 higher by 79.62 pts or +0.98% at 8213.99, CAC 40 up 35.65 pts or +0.49% at 7308.77 and Euro Stoxx 50 up 48.42 pts or +0.99% at 4959.81.
- Dow Jones mini up 27 pts or +0.07% at 40769, S&P 500 mini up 4 pts or +0.07% at 5444.5, NASDAQ mini up 42.75 pts or +0.23% at 18977.25.
GILT AUCTION RESULTS: Decent auction - concession pricing removed
- Similar 10-year auction result to March with a marginally tighter tail at 0.4bp (vs 0.5bp) but the lowest accepted price (LAP) coming in only just above the pre-auction secondary market price.
- The volume of bids was broadly in line with that seen last month too (with a respectable bid-to-cover of 2.85x vs 2.92x prior).
- The concession priced into gilts ahead of the auction has been reversed and we are now trading at similar levels seen around 10 minutes prior to the bidding window closing in both the 4.50% Mar-35 gilt and in futures.
