USDJPY – G7 steps in, equities gain
That’s probably the best kind of quasi-financial aid, Japan could have received at that point. Given how ineffective BoJ’s interventions were back in 2010 there was an additional encouragement for investors to join in the flow of returning domestic capital and try to gain on appreciating Japanese currency. Meanwhile, G7 is a much serious presence and actually might fend off this speculative buying. Can this mark a trend-reversal?
We argued from the very beginning that any appreciation of the yen in the aftermath of the earthquake should be perceived as temporary and in a longer run a trend reversal was (and is) the bottom line scenario. A dramatic drop in USDJPY to 76,57 and a following return to ca. 82 yens per dollar drew a large hammer formation on the monthly interval. However, one needs to keep in mind that this candle will be shaped for two more weeks. Some upbeat confirmations will come with a successful test of an upper limit of a previous consolidation (84,50) and a line drawn along local highs of a multiyear downtrend (currently ca. 86,00).
OIL – prices rise on Libyan no-fly order
Oil prices rebounded sharply with a price of a Brent topping 116 USD per barrel following a no-fly zone kicking in after an UN vote. Even if this decision leads to ousting of Kaddafi at some point, markets seem this point still being remote and are afraid of escalation in tensions in a short run. Moreover, this move may encourage protesters in other countries and heat up a conflict in Bahrain.
A recent rise in oil prices might be a part of the 5th and final wave in an upwards structure. However, before prices turn around they are very likely to make a new high above a previous 119,52 USD per barrel. How far that will be, will depend on political developments in Africa and on the M East in the near future.
Events to watch – light Friday
Friday’s calendar is very light with the Canadian CPI (7.00 ET, 12.00 CET, consensus +0,4% m/m) as the main but with market being indifferent to much more important (and sometimes surprising) readings this week, a light calendar doesn’t make much difference. Assuming no further shocking news from Japan, one can expect some attention to drift back to Libya and the Middle East.
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Przemysław Kwiecień PhD, Chief Economist |
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