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MARKET DEVELOPMENTS – JPY TUMBLES AS GLOBAL STOCKS RECOVER
No news over trade wars is seemingly good news for equity markets, which have recovered from the declines seen yesterday (DJIA, 0.7%, NASDAQ 100 0.4%, S&P 500 0.5%). Investors have now turned their focus on the upcoming earning season for Q2 which will kick off tomorrow as JP Morgan, Citigroup and PNC Financial report their latest update.
JPY: The return of risk appetite has weighed on the Japanese Yen, which currently trades at the lowest level against the greenback in 6-month after a break above key resistance in the form of the falling trendline from 2015. As such, this has fuelled the rise in the USD, which looking at making another push through the 95.00, upside target at 95.50 remains key Alongside this, inflationary pressures continue to build with yesterday’s PPI figure rising at the fastest pace in 7 years, while today’s CPI report showed a yearly rate of 2.9%, which marks the highest reading since February 2012.
GBP: The Pound slightly firmer following the release of the White Paper report, which laid out Theresa May’s plans for the relationship between the UK and EU after Brexit. One thing that has been made apparent is that the PM signals a shift towards a soft Brexit plan, however, given that a number of uncertainties remain, risks will continue to remain elevated.
DailyFX Economic Calendar: Thursday, July 12, 2018 – North American Releases
DailyWebinar Calendar: Thursday, July 12, 2018
IG Client Sentiment: USDJPY Chart of the Day
USDJPY: Retail trader data shows 40.8% of traders are net-long with the ratio of traders short to long at 1.45 to 1. In fact, traders have remained net-short since Jun 28 when USDJPY traded near 110.489; price has moved 1.6% higher since then. The number of traders net-long is 1.3% lower than yesterday and 12.0% lower from last week, while the number of traders net-short is 2.7% higher than yesterday and 2.3% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDJPY prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDJPY-bullish contrarian trading bias.
Five Things Traders are Reading
- “DXY Index Gains Build Further; USD/JPY Nears Yearly High” by Christopher Vecchio, CFA, Sr. Currency Strategist
- “Litecoin (LTC) Price Update – Sellers Remain in Control” by Nick Cawley, Market Analyst
- “GBPUSD Fragile as Downside is Tested”by Martin Essex, MSTA, Analyst and Editor
- “FTSE 100 Analysis: Eyes on Defensive Stocks as Trump Slams NATO”by Justin McQueen, Market Analyst
- “US Crude Oil Price Rallies After Slump” by Martin Essex, MSTA, Analyst and Editor
— Written by Justin McQueen, Market Analyst