Market Drivers for July 18th, 2013
USD/JPY blows past 100.00 on hopes of pro-Abe weekend election
UK Retail Sales match expectations
Nikkei 1.22% Europe 0.06%
Oil $106/bbl
Gold $1276/oz.

Europe and Asia:
AUD NAB Business Confidence -1 vs. 2
CHF Trade Balance 2.72M vs. 2.4M
GBP Retail Sales 0.2% vs. 0.2%

North America:
USD Initial Jobless Claims 8:30
USD Philly Fed 10:00
USD Leading Indicators 10:00

It been a relatively quiet summer night of trading made notable by the move in USD/JPY which cleared the the psychologically key 100.00 level in anticipation of a pro-Abe win in the upcoming Japanese elections this weekend.

Japanese polls are showing that Prime Minister Abe is likely to win control of both houses of Parliament giving his Liberal Democratic Party coalition the largest legislative control since 2007. The news has spurred investor enthusiasm that Mr. Abe may now be able to expand his stimulus program to help spur growth in Japan.

As a result USD/JPY has been bid all night long with the pair rising to a high of 100.30 in moring European trade. Still the pair faces heavy resistance at the 100.50 and will likely need some support from North American data to clear that barrier.

Yesterday Fed Chairman Bernanke steered clear of making any market moving pronouncements and simply reiterated the his views that monetary policy will remain accommodative for the foreseeable future and that any improvements in US economic performance will not necessarily imply an instant change in bias.

Today’s testimony is unlikely to produce any fresh insights. The primary message that the Fed appears to be communicating is that it remains stationary for the time being as improvement in economic data is not yet strong enough to warrant a change in policy. Therefore, the rally if USD/JPY is likely to be driven more by the developments in Japan rather than any fresh initiatives on the side of the Pacific.

Elsewhere UK Retail Sales came in line with expectations printing at 0.2% vs. 0.2%. On a year over year basis sales improved to 2.2% vs, 1.7% eyed. Coming on the heels of better claimant count numbers yesterday, the Retail sales data is confirming that UK final demand in picking up and that Q2 GDP will likely see a marked improvement of the start of the year. Cable popped to 1.5200 in the aftermath of the release and remains well bid at these level, but the pair needs to clear key upside resistance at 1.5300 in order to see more sustained upside momentum.

In North America today the calendar only carries Philly Fed and markets attention will still be focused on Chairman Bernanke’s testimony. Despite adhering to his dovish rhetoric the Chairman has been relatively sanguine about the recent US economic performance and if his optimism remains in place for the second day in a row it could provide a lift to USD/JPY to clear the key 100.50 level as the day proceeds.

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