Crucial reading of weekly claims
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Thursday, August 19, 2010
, Posted by Usman Ali Minhas at 6:06 AM
BoJ considering further expansion
The data on the Japanese GDP for the 2nd quarter we described on Monday was bound to bring forth further repercussions. While the yen gained right after the release, a proximity of multi-year lows on the USDJPY means a real threat of an intervention. Today during the Asian trade speculation on further monetary expansion in Japan surfaced. The BoJ reportedly might extend a lending program at the official rate (0,1%) and the aim is to (among others) weaken the currency. This line of thinking was confirmed by the Japanese finance minister, Yoshihiko Noda, who said the Japanese government thinks about fresh steps to help the economy and weaken the yen.
Should these speculations expand, the pair may eye a reversed head and shoulders formation visible on H4 and D1 interval. A resistance of 86,35 is definitely a key here. A move above it may well fill the formation leading to as high as 87,90. On the other hand, a sign of weakness around this level may encourage investors to retest recent lows (84,70-85,00) again. One should remember about a reliance of the pair on the global sentiment.
Crucial reading of weekly claims
Sentiment on Thursday may depend on the reading of the initial claims data (8.30 ET, 14.30 CET, 478k expected). The one today is especially important, since the recent two were really poor and no improvement today would signal not only a lack of improvement on the labor market (which is the case since the beginning of the year) but actually a deterioration. The market consensus assumes an improvement, albeit a small one, leaving a room for a positive surprise. On the other hand, a reading above 490k could trigger a wave of selling on equity markets.
Sellers on Wall Street got an upper had yesterday when contracts for both S&P500 and DJIA30 touched precisely but failed to climb above Tuesday’s highs. This creates new resistances on both indices – at 1098 and 10450 points respectively.
Events to watch – claims, Philly Fed, Bullard and UK’s retail sales
On top of the weekly claims reading, investors might pay attention to the Philly Fed activity index (10.00 ET, 16.00 CET, exp 7,1 pts.), which is expected to show a moderate improvement vs. July (similarly to the NY Fed released on Monday). Later on, James Bullard’s speech is scheduled (12.30 ET, 18.30 CET). Keeping in mind that his remarks spurred a deflation fears and eventually resulted in a further monetary expansion, it shall attract a lot of attention from equity, forex and FI investors. In UK, a retail sales data (4.30 ET, 10.30 CET, expected at +0,4% m/m) will be released.
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