Market Movers of the Day
Asia-Pacific
*Japan Merchandise Trade Balance in August better than expected at ¥185.7B
Europe
*Euro-zone PMI rose to 50.8 in September from 50.4 the previous month
Americas
*The Fed left benchmark interest rate unchanged at 0.25% meeting market expectations
*EIA Crude Oil Stocks unexpectedly gained 2.8M
The Overall Sentiment
US markets closed in negative territory and the Dollar strengthened in a day filled with volatility caused by the Federal Reserve’s monetary policy meeting. The Fed kept its benchmark interest rate unchanged at 0.25% and stated it will remain exceptionally low for an extended period. According to Fed’s chairman Ben Bernanke the US economy’s recovery is accelerating and Fed officials decided to gradually slow the pace of mortgage securities purchases thus extending the completion of the program to the end of March 2010. By postponing the program’s completion deadline while keeping the magnitude unchanged the Fed’s policy makers are signaling the markets that they see sufficient economy improvement to spread their stimulus over a longer period of time with the purpose of sustaining a smooth transition until the program’s expiration date. Immediately after the Fed’s announcement the Dollar dropped rapidly but forcefully strengthened in the subsequent hours posting its largest gain against the Euro this month and correcting previous losses against the Pound. Volatility was also felt in commodity-linked currencies with the Australian and New Zealand dollars hitting their intraday highest levels in more than a year but declining as the Dollar advanced. Oil contributed to the sentiment by dropping the most in over a month after the weekly Crude Oil Stocks report showed an unexpected gain in stockpiles of 2.8 million barrels. The Yen recuperated versus the Dollar throughout the session after yesterday’s weakness and pushed slightly higher as Japan’s Merchandise Trade Balance showed a surplus of ¥185.7B by the end of the day.
The Day Ahead
The day will start with Australia’s New Home Sales report indicating the current health of the country’s housing conditions and will continue with Germany’s IFO Business Climate survey where markets expectations point to an increase that will bring the index to its highest level in a year indicating that Europe’s largest national economy continues to strengthen leaving recession in the past. In the US Initial Jobless Claims is projected to further indicate that the labor market’s deterioration has slowed the pace as the country’s economy improves. Existing Home Sales is expected to bring some volatility to the Dollar as it is a sensitive factor to the US economy. Market attention will be focused on the G-20 meeting expecting insights on global recovery and exit strategies. In New Zealand its Trade Balance figures will be released where more strength is expected after the positive GDP data earlier this week. The Bank of Japan’s monetary policy meeting will be closely followed to better comprehend the direction of the world’s second largest economy as BoJ’s Governor stated last week that the recovery of the country’s economy may be temporary and only based on worldwide stimulus packages and programs that spurred demand for Japanese cars and electronics.
Technical Analysis
CAD/JPY DAILY
After a steep four-week uphill trend CAD/JPY topped slightly above 90 in early August and developed a bearish channel with very identifiable downward waves. The cross presents an opportunity to open a Short position as it currently trades near the upper boundary of the channel at what seems to be the beginning of a new bearish cycle.
Market Analysis provided by eToro
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