Market Brief
Most Asian regional markets got some colour back on Wednesday, despite the disappointing economic data from Japan. The country’s industrial production fell unexpectedly in August, raising concerns about Japan’s slowdown and building the case for additional monetary stimulus. Preliminary estimates showed that Industrial production contracted -0.5% m/m in August, lower than the market expected increase of 1%, but still above the -0.8% contraction in the previous month. On a year-over-year basis, the output of industrial establishments grew 0.2% y/y, lower than market estimates of 1.8%, but above the flat figure from July.
Retail sales added to the disappointment, confirming that Japan’s economy is faltering. The data came in on the soft side, printing at 0.8% y/y in August, weaker than the market expected increase of 1.2% expected and revised increase of 1.8% in July. The Nikkei and the TOPIX are up 2.46% and 2.59% respectively as the recent data are making investors reassess the prospects of an increase in BoJ’s monetary stimulus.
Elsewhere in Asia, Hong Kong’s Hang Seng climbed 1.62% while mainland China’s major stock index, the Shanghai Composite, climbed 0.72%. South Korea KOSPI added 1.03% and India’s Sensex +0.78%. The yen’s response to the data was muted as USD/JPY continued to move sideways between 119.06 and 121.33.
Australia’s building approval rose 5.1% on a year-over-year basis in August, lower than the market’s median forecast of 7.4% and upwardly revision of 17.9% in July. Private sector’s credit surged 6.3% y/y in August, beating consensus of 6.2% and previous reading of 6.1%. AUD/USD is treading water around 0.70. A resistance can be found at 0.7043 (high from September 24th) while on the downside a first support lies at 0.6939 (low from September 29th), then a second one at 0.6896 (low from September 6th).
In New Zealand, business confidence improved in September and climbed from -29.1 to -18.9. Activity outlook (at 16.7 from 12.2), exports (17.9 from 11) and residential construction (28.6 from 12.1). NZD/USD continues to recover from its low from yesterday, up 1.25% to 0.6370.
In Europe this morning, future markets are pointing higher. The DAX is up 1.53%, the CAC 40 +1.66%, the SMI 0.96%, while the Footsie gained 1.10%. The pound sterling selling pressures are getting stronger and stronger due to the fading prospect of an increase in interest rates by the BoE. The cable is now testing levels last seen in May 2015 and nothing seems able to stop GBP/USD from moving lower.
Today traders will be watching unemployment rates from Germany, Italy and the eurozone; Q2 GDP from UK; inflation report from Italy and the eurozone; mortgage application, ADP employment change and Chicago purchasing manager index from the US.
Currency Tech
EUR/USD
R 2: 1.1561
R 1: 1.1330
CURRENT: 1.1222
S 1: 1.1017
S 2: 1.0809
GBP/USD
R 2: 1.5659
R 1: 1.5383
CURRENT: 1.5148
S 1: 1.5089
S 2: 1.4960
USD/JPY
R 2: 125.86
R 1: 121.75
CURRENT: 119.95
S 1: 118.61
S 2: 116.18
USD/CHF
R 2: 1.0240
R 1: 0.9903
CURRENT: 0.9753
S 1: 0.9513
S 2: 0.9259