Asian mostly lower ahead of Kuroda speech; Nikkei down 2.26%

Most Asian stocks traded lower Monday following some tepid Chinese data and a stronger yen ahead of a speech by Bank of Japan Governor Haruhikho Kuroda. 

In Asian trading Monday, Japan’s Nikkei 225 slid 2.26% as USD/JPYtraded lower by more than half a percent. Earlier Monday, Japan’s Ministry of Economy Trade and Industry said that retail sales in the world’s third-largest economy rose 1.6% in June following a May increase of 0.8%. Economists expected a 1.9% increase in June. 

With Japan’s easing efforts already massive and real interest rates there essentially in negative territory, Kuroda is seen as having few options for weakening the yen in the near-term. 

After Kuroda’s speech, the Federal Reserve and European Central Bank step into the spotlight later this week. 

Hong Kong’s Hang Seng slipped 0.58% while the Shanghai Composite dropped 1.33% after China’s National Bureau of Statistics said Friday that profits at Chinese industrial firms rose 6.3% in June. That is a significant decrease from the 15.5% surge seen in May. Industrial profits in the world’s second-largest economy rose 11.1% in the first six months of this year compared with a growth of 12.3% in the first five months. 

Among the 41 industry groups surveyed in the report, 30 showed higher profits while one posted a loss. China’s current monetary policy is aimed at stimulating growth in the so-called real economy while squeezing speculative real estate investments that have inflated property values despite excess supply. 

Australia’s S&P/ASX 200 rose 0.1% while New Zealand’s NZSE 50 inched up 0.01%. China is the largest export market for both Australia and New Zealand. Australian stocks could be under pressure later this week if Friday’s July jobs report out of the U.S. fails to ignite animal spirits. 

Singapore’s Straits Times index lost 0.28% while South Korea’s Kospi fell 0.38%. S&P 500 futures dropped 0.21%. 

Read More

Crude oil futures - Weekly outlook: July 29 - August 2

New York-traded crude oil futures ended Friday’s session at a two-and-a-half week low, as markets were jittery ahead of the Federal Reserve's upcoming policy meeting amid ongoing uncertainty over the future of the Federal Reserve's stimulus program.

On the New York Mercantile Exchange, light sweet crude futures for delivery in September dropped 0.82% Friday to settle the week at USD104.63 a barrel by close of trade.

On the week, Nymex oil futures fell 3.24%. 

The release of mixed U.S. data on initial jobless claims and durable goods orders on Thursday fuelled fresh uncertainty over whether the Fed will start to scale back its bond buying program later this year. 

The Labor Department said the number of individuals filing for initial jobless benefits last week increased by 7,000 to a seasonally adjusted 343,000, compared to expectations for an increase of 6,000 to 340,000.

Separately, the Commerce Department said orders for long lasting manufactured goods rose by a seasonally adjusted 4.2% in June, compared to expectations for an increase of 1.3%. 

Durable goods for May were revised to a 5.2% gain from a previously reported 3.7% increase.

Core durable goods orders, which exclude volatile transportation items, were flat in June, compared to expectations for a 0.5% increase. 

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar. 

Markets were also jittery after data earlier in the week showed that the preliminary reading of China’s HSBC manufacturing purchasing managers' index fell to an 11-month low of 47.7 in July, from a final reading of 48.2 last month. Analysts had expected the index to rise to 48.6. 

China is the world’s second-largest oil consumer behind the U.S. 

Oil prices found some support however, after the American Petroleum Institute on Tuesday said U.S. oil inventories fell by 1.4 million barrels, well below the 2.6 million barrel decline forecast by analysts. 

Recent oil inventory reports have shown that demand has been on the rise in the U.S. in the past few months. 

In the week ahead, the U.S. is to publish data on gross domestic product and manufacturing activity to further gauge the strength of the U.S. economy. In addition, traders will be eyeing the Fed's monthly policy statement for indications on the future of the central bank's bond-buying program.

The U.S. is the world’s biggest oil consuming country, responsible for almost 22% of global oil demand. 

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for September delivery slipped 0.01% on Friday to settle the week at USD107.11 a barrel.

The London-traded Brent contract lost 1.22% over the week, while the spread between the Brent and the crude contracts stood at USD2.48 a barrel by close of trade on Friday.

Read More

Forex - GBP/USD weeky outlook: July 29 - August 2

The pound held steady against the dollar in subdued trade on Friday, as investors remained cautious after the release of mixed U.S. data and ahead of the Federal Reserve's upcoming policy meeting, amid uncertainty over the future of the U.S. central bank's stimulus program.

GBP/USD hit session lows of 1.5356, before settling at 1.5386, 0.03% lower for the day and up 0.13% for the week.

Cable is likely to find support at 1.5290, Wednesday's low and resistance at 1.5478, the high of June 25. 

Mixed U.S. data on initial jobless claims and durable goods orders on Thursday added to uncertainty over whether the Fed will soon begin to scale back its bond-buying program. 

The Labor Department said the number of individuals filing for initial jobless benefits last week increased by 7,000 to a seasonally adjusted 343,000, compared to expectations for an increase of 6,000 to 340,000.

Separately, the Commerce Department said orders for long lasting manufactured goods rose by a seasonally adjusted 4.2% in June, compared to expectations for an increase of 1.3%. 

Durable goods for May were revised to a 5.2% gain from a previously reported 3.7% increase.

Core durable goods orders, which exclude volatile transportation items, were flat in June, compared to expectations for a 0.5% increase. 

Sterling gained ground on Thursday after the Office of National Statistics said the U.K. economy expanded by 1.4% on a year-over-year basis in the second quarter, in line with expectations. 

The U.K. economy grew by 0.3% year-on-year in the first quarter.The U.K. economy expanded 0.6% quarter on quarter, after a 0.3% expansion in the first quarter. 

The ONS said the service sector expanded by 0.6%, the manufacturing sector grew 0.4% and the construction sector grew by 0.9%.

In the week ahead, the Federal Reserve and the Bank of England are to publish their monthly policy statements. The U.K. is to release data on manufacturing activity.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, July 29 

The U.K. is to release official data on net lending to individuals, which is the change in the total value of new credit issued to consumers, followed by industry data on realized sales.

Later in the day, the U.S. is to produce industry data on pending home sales, a leading indicator of economic health.

Tuesday, July 30 

The U.S. is to release a report on the Standard & Poor's/Case-Shiller Composite-20 house price index, followed by the Conference Board's report on consumer confidence.

Wednesday, July 31 

The U.S. is also to produce GDP data, as well as a report on non-farm employment change and data on manufacturing activity in Chicago. 

Separately, the Federal Reserve is to release its monthly monetary policy statement, which will be closely watched for indications on the future of the central bank's stimulus program.

Thursday, August 1 

The U.K. is to produce a report on manufacturing activity, while the Bank of England will also publish its monetary policy statement. 

The U.S. is to release official data on weekly unemployment claims, followed by a report by the Institute of Supply Management on manufacturing activity.

Friday, August 2 

The U.K. is to produce industry data on house price inflation, as well as a report on construction activity.

The U.S. is to round up the week with official data on non-farm employmet change, the unemployment rate, average hourly earnings and personal spending, as well as a report on factory orders.

Read More

USD/JPY Outlook – July 29-August 2

The Japanese yen flexed some muscle late in the week, as USD/JPY dropped over 200 points on the week. The pair closed just above the 98 line, at 98.09. The upcoming week is fairly busy, with nine events on the schedule. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.

The yen managed to break away from the 100 level late in the week, following solid Japanese inflation releases. As well, US manufacturing and employment numbers disappointed on Thursday, hurting the dollar.

USD/JPY daily chart with support and resistance lines on it. Click to enlarge: 

1. Retail Sales: Sunday, 23:50. Retail Sales has been all over the map, making accurate predictions difficult. The indicator posted a nice gain of 0.8%, in the June release, its sharpest gain this year. The markets are expecting a much stronger reading this time around, with an estimate of 1.7%. Will the indicator be able to meet or  beat this rosy prediction?
2. Household Spending: Monday, 23:30. With Japanese indicators showing improvement recently, the markets were surprised that Household Spending posted a sharp drop last month, the first decline of 2o13. The indicator declined 1.6%, while the estimate stood at 1.5%. The markets are expecting a sharp turnaround this month, with an estimate of a 1.2% gain.
3. Preliminary Industrial Production: Monday, 23:50. This important manufacturing release has looked solid in 2013, posting gains every month this year except once. However, the markets are bracing for a sharp drop this month, with an estimate of -1.4%. Will the indicator surprise the markets and remain in positive territory?
4. BOJ Governor Haruhiko Kuroda Speaks: Tuesday, Tentative. Kuroda will address the Research Institute in Tokyo. Analysts will be listening closely for any clues as to future monetary policy. Although the BOJ is expected to keep the present course, any unexpected statement from the governor can affect the currency markets.
5. Manufacturing PMI: Tuesday, 23:15. This index is a third-tier release, so it usually does not have a major impact on USD/JPY. The PMI has been steadily rising in 2013, and has been above the 50-point level since February, which indicates steady expansion in the manufacturing sector. The markets are hoping that the upward trend continues in July.
6. Average Cash Earnings: Wednesday, 1:30. This indicator focuses on employment income available to workers, and is an important consumer spending release. The indicator disappointed last month, dropping to a flat 0.0%, well off the estimate of 0.6%. The forecast for the July release calls for a modest gain of 0.2%.
7. Housing Starts: Wednesday, 5:00. This indicator tends to be volatile, resulting in predictions which are well off the mark. The previous release is a case in point, with the indicator posting a sharp gain of 14.5%. The estimate stood at 6.3%. The markets are expecting another strong gain this month, with an estimate of 15.9%, which would  be a record for 2013. Will the indicator be able to meet the market expectations?
8. 10-year Bond Auction: Thursday, 3:45. 10-year bonds posted an average yield of 0.88%, last month, almost unchanged from the June release. The markets are not expecting any major changes in the upcoming auction.
9. Monetary Base: Thursday, 23:30. The BOJ continues to pump money into circulation as part of its aggressive monetary policy. Monetary Base has been steadily increasing in 2013, and rose to 36.0% in the previous release. However, for the first time in 2013, this was below estimate, as the forecast stood at 41.2%. The indicator is expected to continue to rise, with an estimate of 43.2% for the July release.

*All times are GMT.

USD/JPY Technical Analysis

USD/JPY started the week at 100.36. The pair touched a high of 100.45, but the yen then posted strong gains, as the pair dipped below the 98 line, dropping to a low of 97.96. USD/JPY closed the week at 98.09, as the support line of 97.80 (discussed last week) remained intact at the end of the trading week.

Live chart of USD/JPY:

Technical lines from top to bottom

With the yen posting strong gains, we start from lower ground.

103.50 provided support for the pair in July and September 2008 before reverting to a resistance line in October 2008. The line had been quiet since then but was briefly breached in mid-May. Next, 102.50 was a key resistance line in late May.

101.44, which was the post-crisis high seen in April 2009, and has not been tested since mid-July. 100.85 was busy earlier in July. It has strengthened as the pair trades at lower levels.

The significant 100 level has seen a lot of activity, and USD/JPY see-sawed around this line right up until Friday, when the yen pushed higher and managed to break out of the shadow of this line.

The pair blew past 98.90, which was providing weak support at the start of the week. This line now finds itself in a resistance role, protecting the round number of 99.00.

97.80 was quite busy in June, and was breached late in the week, but held as the pair bounced back above the 98 line. It is providing weak support, and could face strong pressure early in the week.

The March 2013 peak of 96.71 is providing support. This is followed by the round number of 95, which was last tested in mid-June.

93.79 marked the low point of a rally by the dollar which started in mid-June and saw the pair climb to the mid-101 range earlier this month.

The final support level for now is 92.86. This line saw action in early March and again in early April. The latter date marked the low point of a yen rally which saw the currency climb very close to the 100 level.

I am bearish on USD/JPY

The Japanese economy continues to show signs of improvement. Last week’s inflation releases point upwards, which appears to show that Abenomics is achieving results. Further positive Japanese releases could boost the yen, although traders should remain on their toes for any hints from the Federal Reserve about QE, which would likely be a market-mover.

Read More