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Forex Analysis: Japanese Yen Rally May Fade if US GDP Buoys Sentiment

Forex Analysis: Japanese Yen Rally May Fade if US GDP Buoys Sentiment

Ilya Spivak, Head Strategist, APAC

The Japanese Yen rose on haven demand as disappointing earnings from Apple Inc sank Asian stocks but the rally may fade if a pickup in US GDP buoys sentiment.

Talking Points

  • Japanese Yen Recovered as Dismal Apple Inc Earnings Sank Asian Exchanges
  • S&P 500 Futures Point to Risk Aversion but US GDP May Counter Negativity
  • Euro May Outperform on Pickup in Risk Appetite, Dollar Losses Likely Limited

The Japanese Yen recovered as Asian stocks sank overnight, boosting forex traders’ demand for the regional haven currency. The MSCI Asia Pacific regional benchmark equity index fell 0.9 percent. Newswires chalked up the selloff to disappointing set of earnings from Apple Inc. The world’s largest company by market value reported profits rose $8.67/share in the fiscal fourth quarter, trailing analysts’ estimates calling for an $8.75/share result, and slashed its guidance for the three months ahead. The Australian Dollar underperformed, down as much as 0.5 percent against its top counterparts.

S&P 500 index futures tumbled to their lowest level in nearly two months ahead of the opening bell in Europe, hinting the risk-averse mood is likely to carry forward. The economic calendar is quiet until third-quarter US GDP figures cross the wires. Expectations call an increase of 1.8 percent, marking acceleration from the 1.3 percent recorded in the three months through June.The pickup may stoke hopes that firming growth in the world’s top economy is becoming better able to offset sluggish performance in Asia and a recession in Europe. This may offer support to sentiment trends, countervailing overnight negativity.

Such an outcome is likely to see the selling pressure re-applied to the Japanese Yen as haven-seeking capital flows dry up. The likewise safety-linked US Dollar may also come under near-term pressure but losses are likely to be relatively contained. A strong US GDP print is likely to dent bets on an expansion of Federal Reserve stimulus efforts, offering the greenback a degree of support. The Euro is showing the most significant positive correlation with the S&P 500 among the major currencies (on 20-day percent change studies), hinting it is likely to outperform in a risk-on scenario.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Trade Balance (NZ$) (SEP)

-791M

-850M

-809M (R-)

21:45

NZD

Trade Balance YTD (NZ$) (SEP)

-888M

-914M

-885M (R-)

21:45

NZD

Exports (NZ$) (SEP)

3.31B

3.30B

3.31B (R-)

21:45

NZD

Imports (NZ$) (SEP)

4.10B

4.20B

4.12B (R+)

23:30

JPY

National CPI (YoY) (SEP)

-0.3%

-0.4%

-0.4%

23:30

JPY

National CPI Ex-Fresh Food (YoY) (SEP)

-0.1%

-0.2%

-0.3%

23:30

JPY

National CPI Ex Food, Energy (YoY) (SEP)

-0.6%

-0.7%

-0.5%

23:30

JPY

Tokyo CPI (YoY) (OCT)

-0.8%

-0.8%

-0.7%

23:30

JPY

Tokyo CPI Ex-Fresh Food (YoY) (OCT)

-0.4%

-0.5%

-0.4%

23:30

JPY

Tokyo CPI Ex Food, Energy (YoY) (OCT)

-1.0%

-1.1%

-1.1%

0:00

NZD

NBNZ Activity Outlook (OCT)

25.5

-

29.3

0:00

NZD

NBNZ Business Confidence (OCT)

17.2

-

17

1:35

CNY

MNI Business Sentiment Indicator (OCT)

51.86

-

51.35

Euro Session: What to Expect

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German Import Price Index (MoM) (SEP)

-0.7% (A)

1.3%

Low

6:00

EUR

German Import Price Index (YoY) (SEP)

1.8% (A)

3.2%

Low

6:00

EUR

German GfK Consumer Confidence Survey (NOV)

6.3 (A)

5.9

Medium

6:45

EUR

French Consumer Confidence Indicator (OCT)

84

85

Low

6:45

EUR

French Business Survey Overall Demand (OCT)

-

-24

Low

7:00

CHF

KOF Swiss Leading Indicator (OCT)

-

1.67

Medium

8:00

EUR

Italian Business Confidence (OCT)

88.7

88.3

Low

8:00

EUR

Italian Economic Sentiment (OCT)

-

75.5

Low

9:00

EUR

Italy to Sell 2014 0-Cpn Bonds, 2021-26 I/L Bonds

-

-

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2865

1.2996

GBPUSD

1.6049

1.6165

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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