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Risk Appetite Reappears While USD/JPY Inches Towards ¥100.00.

Risk Appetite Reappears While USD/JPY Inches Towards ¥100.00.

2013-07-01 16:24:00
Kevin Jin,
Share:

THE TAKEAWAY: Chinese Manufacturing PMI (JUN): 50.1 actual versus 50.1 expected, from 50.8 prior > US ISM Manufacturing (JUN): 50.9 actual versus 50.5 expected, from 49.0 prior > USDJPY slowly approaches the critical ¥100.00 level

Markets are trading broadly higher today as investors are becoming increasingly bullish, furthering sentiment that the worst may now be over. The past two weeks have caused much concern about global growth in light of possibly earlier than expected QE tapering as well as a severe drought in Chinese bank liquidity. Even yesterday, Chinese President Xi Jinping declared that GDP will not be the only focus when considering growth; other factors such as environmental sustainability and banking reform matter as well.

Nevertheless, the implied market volatility, measured by the CBOE Volatility Index (VIX) is down -4.98% to 16.02 at the time of writing, falling to its lowest level since June’s FOMC meeting. Part of the positive sentiment is a result of decent economic data releases today. Chinese data has been a big worry of late and Chinese Manufacturing PMI data came in line with Bloomberg News survey expectations of 50.1, barely avoiding a contraction reading. The Eurozone unemployment rate came in at 12.1%, below the Bloomberg News survey expected 12.3%. British Manufacturing PMI also beat expectations: 52.5 actual; 51.4 expected (Bloomberg News survey). Lastly, US ISM Manufacturing data slightly beat estimates although some subcomponents (e.g. employment) of the survey were mixed: 50.9 actual; 50.5 expected (Bloomberg News survey). These figures are not spectacular but it is noteworthy that none of them meaningfully missed expectations.

Investor optimism today can be confirmed by examining various asset classes today. Equities are globally higher today and the S&P 500 is now trading about 4% off its June low: S&P +1.18%; Euro Stoxx +0.76%; FTSE +1.49%; Nikkei +1.28%; Hang Seng +1.78% at the time. Commodities are also trading well today as base metals recoup some of their previous losses: WTI +1.43%; Brent +0.98%; COMEX Copper +3.42%; Shanghai Copper +1.34% at the time of writing. Bond markets are smaller participants in the price action today. 10YR government bond yields trade as follows: US +0.0bps (+0.00%) to 2.486%; Germany -0.9bps (-0.52%) to 1.718%; Italy -12.8bps (-2.81%) to 4.412% at the time of writing. In the midst of this, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) falls -34 (-0.31%) to 10815 at the time of writing.

AUDUSD 15-minute Chart: July 1, 2013

Risk_Appetite_Reappears_While_USDJPY_Inches_Towards_100.00._body_Picture_4.png, Risk Appetite Reappears While USD/JPY Inches Towards ¥100.00.

Charts Created using Marketscopeprepared by Kevin Jin

The AUDUSD is modestly rebounding today, reversing most of Friday’s losses. The pair is up +134 pips (+1.47%) to $0.9242 at the time of writing. Trading took the pair higher through most of Asian and European sessions today with only a minor correction occurring during London Open at the .9200 resistance level. The AUDUSD finally had enough strength to push past this .9200 level when US ISM Manufacturing data was released at 14:00 GMT (10:00 EDT on chart above).

GBPUSD 15-minute Chart: July 1, 2013

Risk_Appetite_Reappears_While_USDJPY_Inches_Towards_100.00._body_Picture_3.png, Risk Appetite Reappears While USD/JPY Inches Towards ¥100.00.

Charts Created using Marketscopeprepared by Kevin Jin

The GBPUSD is also higher today, adding +43 pips (+0.28%) to $1.5241 at the time of writing. The cable edged higher throughout most of the Asian session before moving below the 1.5200 level near London Open. The pair shortly rebounded after British PMI data came in positive, as noted above, with the data being released at 08:30 GMT (04:30 EDT on chart above).

EURUSD 15-minute Chart: July 1, 2013

Risk_Appetite_Reappears_While_USDJPY_Inches_Towards_100.00._body_Picture_2.png, Risk Appetite Reappears While USD/JPY Inches Towards ¥100.00.

Charts Created using Marketscopeprepared by Kevin Jin

The EURUSD is rebounding off the key $1.3000 support level today after mostly positive Eurozone employment and PMI data. The EURUSD did see some selling pressure at 1.3050 midway through the London session but the modest correction was outpaced by the uptick near London Close. The pair is trading +55 pips (+0.42%) to 1.3062 at the time of writing.

USDJPY 15-minute Chart: July 1, 2013

Risk_Appetite_Reappears_While_USDJPY_Inches_Towards_100.00._body_Picture_1.png, Risk Appetite Reappears While USD/JPY Inches Towards ¥100.00.

Charts Created using Marketscopeprepared by Kevin Jin

The USDJPY is slowly gaining on the day, increasing +46 pips (+0.46%) to 99.64 at the time of writing. The pair is close to the psychologically important ¥100.00 level. The pair was unable to breach this level in today’s trading and it will be interesting to watch how price reacts at this level. There is some small selling pressure towards London Close, but the move off the high today is just a modest 20 pips at the time of writing.

--- Written by Kevin Jin, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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