Mr. Japanese yen was completely ignorant to the horrible economic news out of Japan and mostly consolidated against Ms. USA. When I hear recession, I usually expect volatility but this wasn’t the case on Monday. Japan’s Q3 GDP was pretty much depressing and Mr. Abe and his Abenomics could be kicked out in a snap election as early as December 14, not to mention Japan’s aging population and hesitation to raise taxes.
Keep in mind though that a weak Japanese yen could actually have a positive impact on the Japanese economy because they rely heavily on exports so this whole recession thing could just be a trick to weaken mr. Japanese yen in their favor.
On the daily forex dance floor, we already reached and surpassed our previous bullish targets af 114.600 but on Monday we had an indecisive spinning top candlestick formation at the 116 level as the pair continued to dance above the ichimoku cloud. The RSI though has been in the overbought zone for quite a while and we could see a pullback towards the 50% Fibonacci level before the pair shoots back up towards our bullish targets at 117.500 and 123. For now set your supports at the Fibonacci levels. At this point only a break below 109 would change our overall outlook to bearish with 107.200 as first alternative target.
Overnight, Japan’s Sunday sell-off didn’t last long. After news of the recession hit on Sunday night we saw the market have the biggest fall since August. Overnight however it has all but entirely reversed those losses as the talk now turns away from recession and on to stimulus. As well as a likely shelving of the next sales tax increase, Shinzo Abe is also weighing up a further three trillion Yen ($26bn) in stimulus.
Other pairs have mostly been consolidating and likely to continue their side ways dancing moves toward the year end as traders become more excited about the holiday season shopping than trading. On Wednesday the US dollar will be back in focus when the FOMC release the minutes from their last meeting.
Europe Avoiding Recession
Europe avoided the same fate as Asia yesterday, by shrugging off the news that Japan had entered into a recession. Stock markets in Europe flashed green throughout the session, with the Spanish leading the charge with a move for the IBEX of more than 1.5%.
In Europe, ECB member Yves Mersch threw out a left field idea in a speech yesterday, saying that the ECB could buy gold, shares and exchange traded funds in a bid to boost growth and spur inflation. Mr Mersch is known to sit at the more conservative end of the board room table, so words like this are quite a surprise. However, he does balance his argument somewhat by saying the ECB can expand its balance sheet, but does not have the mandate to increase the risks that it takes. The Telegraph, once again, has more.
An interesting story on Ukraine this morning, from the FT. Apparently almost 10% of their entire bond market is held by one investment fund, Franklin Templeton. The US fund manager will have seen the value of these bonds plunge to record lows in the last few weeks and, should Ukraine face a restructure, stands to lose an awful lot. The bond manager behind the fund had previously made a fortune buying Irish debt during their crisis, but could have backed the wrong horse as Ukraine continues to deteriorate past the point of being rescued with the current promise of IMF bailout monies.
Australia is Worried
In Australia, the Reserve Bank are worried that actions in Japan may hold the Aussie dollar at higher levels than they’d like. The RBA is already vocal about the Aussie being too strong versus fundamentals, but now fear that diversification by Japanese pension funds could well see them buying Australian bonds in a bid to reach a much higher yield, which in turn could hamper Australia’s own economic progress if this does have a marked impact on the currency. Meanwhile Credit Suisse have said that they think the RBA need to cut rates to below 2% in order to boost confidence and to get ahead of falling inflation expectations.
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Intraday Forex Technical Levels
EUR/USD 4-hour: Broke above the Ichimoku’s cloud.
Invest Diva Likes: Long positions above 1.2487 with targets at 1.2563 and 1.2624 in extension.
If Pair Goes Nuts: Below 1.2487 look for further downside towards 1.2363 and 1.2299.
What’s up on the Forex Dance Floor: The pair once again broke above the 23% Fibonacci level and finally broke above the Ichimoku’s cloud. The RSI is moving above the neutrality area.
Supports and Resistances
1.2624
1.2563
1.2487 Pivot Point
1.2363
1.2299
GBP/USD 4-hour: Consolidating.
Invest Diva Likes: Short positions below 1.5656 with targets at 1.5591 and 1.5481 in extension.
If Pair Goes Nuts: Above 1.5591 look for further upside towards 1.5731 and 1.5817.
What’s up on the Forex Dance Floor: The pair is consolidating around the pivot level at 1.5656 below the Ichimoku’s cloud. The RSI is moving below the neutrality area.
Supports and Resistances
1.5817
1.5731
1.5656 Pivot point
1.5591
1.5481
USD/CHF 4-hour: Teasing the 38% Fibonacci level.
Invest Diva Likes: Short positions below 0.9592 with targets at 0.9548 and 0.9503 in extension
If Pair Goes NutsAbove 0.9592 Look for further drops with targets at 0.9648 and 0.9687 in extension.?
What’s up on the Forex Dance Floor: The pair ihas broken belowthe Ichimoku’s cloud and teasing the 38% Fibonacci level. The RSI is heading down below the neutrality area.
Supports and Resistances
0.9687
0.9648
0.9592 Pivot Point
0.9548
0.9503
USD/JPY 4-hour: Consolidating.
Invest Diva Likes: Long positions above 116.56 with targets at 117.50 and 118.86 in extension.
If Pair Goes Nuts: Below 116.56 look for further downside towards 115.60 and 114.16.
What’s up on the Forex Dance Floor: The pair is consolidating around a support level at 116.56 above the Ichimoku’s cloud. The RSI is moving above the neutrality area.
Supports and Resistances
118.86
117.50
116.56 Pivot Point
115.60
114.16
AUD/USD 4-hour: Consolidating.
Invest Diva Likes: Long positions above 0.8724 with targets at 0.8814 and 0.8894 in extention.
If Pair Goes Nuts:. Below 0.8724 look for further downside towards 0.8684 and 0.8635.
What’s up on the Forex Dance Floor: The pair is consolidating below the 50% Fibonacci level at 0.8724 above the Ichimoku’s cloud. The RSI is slightly above the neutrality area.
Supports and Resistances
0.8894
0.8814
0.8724 Pivot point
0.8684
0.8635
EUR/JPY 4-hour: Uptrend.
Invest Diva Likes: Long positions above 146.80 with targets at 148.92 and 150.08 in extention.
If Pair Goes Nuts:. Below 146.80 look for further downside towards 145.03 and 143.43.
What’s up on the Forex Dance Floor: The pair is on an overall uptrend and continues going up above the Ichimoku’s cloud. The RSI is reaching the overbought zone.
Supports and Resistances
150.08
148.92
146.80 Pivot point
145.03
143.43
Intraday Commodities Technical Levels
Dow Jones Intraday: further upside.
Invest Diva likes: Long positions above 17555 with targets at 17660 and 17700 in extension.
Alternative scenario: Below 17555 look for further downside with 17480 and 17425 as targets.
Gold spot Intraday: bullish bias above 1173.
Invest Diva likes: Long positions above 1173 with targets at 1195 and 1205 in extension.
Alternative scenario: Below 1173 look for further downside with 1168 and 1156 as targets.
Crude Intraday: bullish bias above 74.5.
Invest Diva likes: Long positions above 74.5 with targets at 76.3 and 77.2 in extension.
Alternative scenario: Below 74.5 look for further downside with 73.25 and 72.2 as targets.
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