Intraday Market Thoughts

Yen Strength Done Already?

by Adam Button
Jan 5, 2014 23:32

Yen crosses staged an impressive comeback late on Friday, tracing out bullish technical patterns. The Australian dollar is the best performer to start the week while the pound is lower. The Asia-Pacific calendar is quiet with only the AiG Performance of Services index from Australia and the private China services PMI.

USD/JPY finished Friday unchanged on the day at 104.85 after falling as low as 104.08. It's early but the dragonfly doji daily candle is a bullish signal. The commodity currencies also posted impressive reversals against the yen.

What stands out about the yen charts is how all the major pair retraced to areas of volume, to the top of the Dec 16-20 ranges before rebounding higher. Volume, and retracing from low volume moves, is a classic technical principle.  It's often impossible to know forex trading volumes but the holiday period is an exception because volumes in every asset class are so low.

On the weekend, Fed members continued to speak at a conference in Philadelphia but Dudley and Kocherlakota refrained from comments on the economy. Plosser talked about taper at a faster than pace than $10 billion/meeting if the economy improves while Rosengren preached patience rather than tapering. Plosser and Rosengren are at the opposite ends of the Fed hawk/dove spectrum so their comments are no surprise.

Canadian finance minister Flaherty sent some positive messages on the loonie, saying the forecasted 2015-16 fiscal year surplus 'won't be close' and that the Bank of Canada will face pressure to raise interest rates this year. The BOC has a neutral stance and the market isn't pricing in any chance of a hike this year.

The early-week calendar doesn't feature any top-tier data releases. At 1730 GMT, the Australia Industry Group releases its December performance of services index. In November the survey was at an 8-month high of 48.9. Later, at 0145 GMT, the HSBC China services PMI will be released. The previous reading was 52.5.

Act Exp Prev GMT
ISM Non-Manufacturing PMI (DEC)
54.6 53.9 Jan 06 15:00
52.5 Jan 06 1:45

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