USD/JPY: Market Activity Should Be Low This Week
- Bank of Japan board member Takako Masai said on Monday she was worried about sudden swings in financial markets that could be caused by a high degree of uncertainty surrounding the global economy. Masai named the incoming U.S. government's economic policies, Britain's negotiations to leave the European Union, and worries about Europe's financial sector among such uncertainties. She added it was important for the BOJ to operate monetary policy without becoming a source of market volatility.
- Ministry of Finance data showed on Monday that exports fell 10.3% in the year to October, pulled down by a strong rise in the value of the yen and lower export volumes, much weaker than the expected 8.6% drop and September's 6.9% decline. The trade results came on the heels of recent data showing Japan's economy expanded for a third quarter in July-September as exports recovered and imports fell.
- However, recent PMI showed manufacturing activity expanded at the fastest pace in nine months in October as output and new export orders picked up. What is more current yen weakness could improve exports outlook soon.
- The dollar rose to 111.19 yen, its highest since early June. Market activity will be low in the coming days ahead of U.S. Thanksgiving holiday later in the week. Tokyo markets will also be shut for a public holiday on Wednesday.
- Our trading strategy remains unchanged – we are looking for a corrective move to get long at lower levels.
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Gold Rebounds Slightly On Physical Buying
- Gold prices rose in Asian trade on Monday, snapping a 3-session losing streak, buoyed by physical buying after the metal slid to a 5-and-a-half-month low on Friday.
- In the previous session, the metal fell as much as 1% to mark its lowest since May 30, slightly above 1,203. The low prices have induced some interest in the physical market.
- The dollar held near 13 1/2-year highs against a currency basket on Monday, on continued bets of faster inflation and higher interest rates. Strong dollar and strengthening expectations for monetary policy tightening in the U.S. put gold under pressure.
- Gold premiums in India, the second largest consumer of the precious metal, jumped to two-year highs in the week to November 18 as jewellers ramped up purchases on fears the government might curb imports after withdrawing higher-denomination notes from circulation.
- Speculators cut their net long position in COMEX gold for the first time in four weeks, in the week to November 15, and also reduced it in silver, U.S. Commodity Futures Trading Commission data showed on Friday.
- It could be difficult for gold prices to recover in such an environment. We stay sideways on precious metals.
