Tuesday November 30, 2004 - 11:05:12 GMT
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FOREX: US OPEN MARKET POINTS 11-30-04
Will High Yen Cause Recession in Japan?
Is Japan teetering on the edge of yet another recession? Yen bulls are starting to run out of excuses as tonight’s horrid eco data suggests that the Land of the Rising Sun may be close to the tipping point. With Industrial Production contracting by –1.6% versus 0.1% expected, Household Spending increasing a paltry 0.1% against 0.8% projected and Small Business Confidence falling to 48.9 - well below the key 50 level - economic indicators are furiously flashing a yellow warning. Japan is suffering from chronically weak domestic demand caused by declining wages in 40 of the last 44 months. This trend is now exacerbated by a global economic slowdown and a strongly appreciating yen both of which are affecting the country’s export income. Although BOJ has not intervened in the FX markets, the necessity to do so increases with every downtick in USD/JPY. Tonight, despite very poor economic news out of Japan, the pair still can’t clear the 103 handle, as every 30 point rally brings a new wave of sellers. Given the barrage of disappointing numbers out of Japan over the past month including the anemic 0.3% GDP report for Q3, Japanese authorities are unlikely to allow the pair to drift much below parity. Many traders now feel that 100 handle in USD/JPY is the line in the sand the BOJ will not allow the market to cross fearing that such rapid yen appreciation will almost certainly send the export driven Japanese economy into a full recession.
Turning to the Euro-zone the news is hardly more positive as French Business and Consumer confidence both miss expectations. The French manufactures are gravely concerned about the impact of skyrocketing euro on their ability to profitably export their wares, while French consumers are hampered by exceedingly high oil prices and lethargic job demand. Although French unemployment surprisingly decreased by –5K in October, the unemployment rate was unmoved at 9.9% as business hiring remained cautious.
With Japanese and Euro-zone data unsupportive of their respective currencies, a series of positive economic reports out of the US this week, could offer traders just the right excuse to stage a successful counter trend rally. In short if geo-political situation remains stable, the focus should turn back to economics favoring dollar bulls as the week progresses.
FX Spot Overnight
- EUR consolidates around 3250 awaiting US data
- JPY recaptures 103 Japanese data misses badly
- GBP rallies back to 8950 as housing data prints better than expected
- CHF unaffected by inflation data trades around 1460
- 13:30GMT – (8:30 AM EST) USD GDP prelim Expected 3.7%, Previous 3.7%
- 13:30GMT – (8:30 AM EST) USD GDP Price Deflator Expected 1.3%, Previous 1.3%
- 13:30GMT – (8:30 AM EST) USD Personal Consumption Expected 4.7%, Previous 4.6%
- 13:30GMT – (8:30 AM EST) CAD GDP (Q/Q, S.A.A.R.) Expected 3.5%, Previous 4.3%
- 13:30GMT – (8:30 AM EST) CAD GDP M/M Expected 0.1%, Previous 0.5%
- 15:00GMT – (10:00 AM EST) USD Chicago PMI Expected 62, Previous 68.5
- 15:00GMT – (10:00 AM EST) USD Consumer Confidence Expected 96.1, Previous 92.8
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