Market Movers of the Day
Asia-Pacific
BoJ Minuets
Tertiary Industry Index rises 0.3% MoM against 0.1% expected.
Americas
Fed Chairman Bernanke speech
Foreign Investment in Canadian securities rises to $5.08B in August substantially better than expected.
Canadian investment in foreign securities at $0.11B
The Overall Sentiment
Sentiment was strongly bullish as better than expected earnings results and weaker Dollar pushed equity’ and commodity’ prices north with most benchmark indexes in the money. In the Tokyo session comments from the Bank of Japan that the Japanese economy is slowly improving but is still in its worst state in more than 50 years. The BoJ also added that credit markets have improved although the recovery in the various regions of Japan varies with some regions still facing very harsh economic conditions. The Nikkei reacted rather negatively to the news which added to the negative headwinds already caused by the Yen’s appreciation. The Nikkei ended the day lower by around -0.2% and the JPY was slightly higher but close to flat trading around 90.6 versus the Dollar and 136 against the Euro. .However the broader sentiment in Asia was strongly positive as expectations of better than expected earnings mainly in Wall Street continued to mount. The positive sentiment continued through the London and the New York sessions with the FTSE up by 1.76%, the S&P higher by 0.94% and the NASDAQ gaining 0.91%.
As risk appetite was elevated investors sentiment for the dollar continued to be bearish with the Fed’s statement later in the day only providing that small spark needed for another Dollar selloff. The Fed outlined it will keep rates at record lows for the near future. With that statement coming in the midst of a large equities rally the Dollar easily moved to lower levels trading just 20 pips short of the 1.5 mark versus the euro and reaching a record lows for the year against the Aussie trading close to 0.93 in what was a broad Aussie rally. The Aussie rallied rather strongly against most majors, largely in reaction to strong commodities’ gain and comments from RBA officials stating rates in Australia are likely to continue rising.
In the Commodities’ arena Oil was at the forefront reaching 80$ a barrel close to the end of the US session marking a 140% rise from the beginning of the year. Natural gas traded close to 5$ and in the Metals play Gold regained strength after mobbing to the 1050$ zone and moved above 1060$ aiming to retest the 1070$ record. Silver moved higher around 60 cents as investors look for a retest of 18$.
The Day Ahead
Sentiment will continue to be fueled by the earning releases which continue to surprise for the upside including Apple which managed to surprise investors even though high expectations were already in place for the company’s earnings. Economic data will include the Japanese leading economic index, the UK M4 level which will reflect the status of the UK credit market, PPI figures in Germany and the US will reflect on inflationary pressuring coming from the producers , the API data will reflect on Oil supply and the ABC/Washington consumer confidence will gather attention as always. The Canadian economy is expected to gather some attention towards mid day with the BoC rate decision. Although economic conditions have improved for Canada and commodities exports have somewhat recovered raising the possibility for a rate increase in Canada, the strong Lonnie and the weak demand from the US the largest trading partner of Canada could postpone the monetary tightening. All in all equities will continue to steer markets’ direction once again with sentiment moving in divergence to earnings.
Technical Analysis
AUD/JPY
In recent weeks the pair has been trading in the range of 76 to 80.5 level in a sideway trend gaining bullish momentum slowly but confidently. The break of the 80.5 area upwards is substantial in the pair’s long run north as it confirms the pair’s run towards a test of the 90 level and maybe 100 in the future. Although the stochastic indicators suggest some profit taking could take place, for now it seems the bullish momentum is firm.
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