Japan is certainly currently going through some changes with Abenomics continuing to be a real thing, as Shinzo Abe battles on to secure power through another election. The main focus though today will be on Japanese inflation figures, which has been the main focus of Abenomics now for some time. With the devaluation of the Yen during the early years of Abenomics it did have an inflationary effect, however it could never be maintained and Japanese policy makers continue to seek a stable 2% inflation figure. Expectations for this evening though are for a low 0.6% Y/Y for Japan, which is some way of the figure they’re after. If we are to see any real change in Japan then certainly we see some stronger figures, however that might be some time off.
For the traders in the market place there has been a resurgence in the USDJPY bulls as the Yen looked to weaken on the political announcement. However, stiff resistance at 113.257 continues to be a major hurdle going forward and resistance higher up at 114.258 is also looking like it may be a significant barrier for the bulls. If we do see a reversal downwards from here then I would expect the 200 day moving average to provide some dynamic support and combined with support at 111.944 it offers strong support for the bulls. If we do see a breakthrough here then a further extension to 110.821 is certainly on the cards and should not be disregarded at all. Either way Abenomics is going to have to work its magic if the Yen is ever to devalue again and provide the inflationary boost that Japan so desperately needs.
The UK economy continues to be a mixed bag, but volatility is certainly in a number of peoples favour when it comes to trading and for me the FTSE 100 has been quite interesting as of late. After long periods of trending upwards in a bullish market we are starting to see volatile consolidation playing of key levels which provides traders with opportunities. UK GDP data is due out tomorrow and the market is expecting 0.3% for the quarter which would be a decent rate of expansion with the current amount of uncertainty. If we see a drop here then the FTSE will fall, while a solid number above what is predicted would drive the FTSE higher.
If you look at the charts the 200 day moving average has been charging up, but is starting to slow down a fair bit and is acting as dynamic support at present in conjunction with 7319 the support level. If we see strong figures then we could see further extensions higher to 7436, however a breakthrough of this level would hit the current consolidating trend lines in the market. If we see a fall however, it may touch on the trend line or pause at support at 7200 which is also a psychological level that markets may look to respect.