​Stock Markets – Driver of Movements in USD/JPY (Weekly Review)

2018-10-15
Compared to previous weeks and even months, the last trading week can be called active, primarily due to the collapse in global stock markets, which triggered an increased demand for such “safe-haven” assets like Gold and the Japanese yen. Thus, despite the fact the US Federal Reserve has already raised the interest rate and is expected to raise it further, the US dollar continued to lose momentum paired with the Japanese yen, as a result of which it is traded below the 112th figure, the loss of which could worsen its technical perspectives. The ability of the stock market to return to the channel of the uptrend will return the demand for the USD/JPY.

The British pound, along with the Euro, strengthened against the US dollar, having received support from the comments of high-ranking officials, according to which the EU and the United Kingdom can reach a compromise in the negotiations on Brexit. However, the positive impact of this news was not long, and at the end of the week both currencies lost some of the positions gained from the USD. Their technical perspectives still look constructive, but further dynamics, and in particular the GBP dynamics, will depend on the outcome of the EU summit on Brexit.

The euro after the breakthrough of important levels looks good in technical terms, but in fundamental terms it’s not as good as the bulls would like it to be. Political risks associated with Angela Merkel party’s presumable loss of majority in the German government, and the monetary policy of the Italian new government, which could lead to a conflict situation with the EU, are unlikely to contribute to breaking through the euro highs of the week and further growth, so its attempts to develop an upward trend may collide with the interest for sale. Risks for the USD are still represented by trade wars and the US sanctions against a number of countries, that trigger some countries to refuse from the USD assets and switch to settlements in national currencies.

Schedule for this week:

Monday, October 15
12:30 GMT – USA. Retail Sales (MoM) (Sep);
12:30 GMT – USA. "Retail Control" (Sep);
12:30 GMT – USA. Retail Sales Ex Gas/Autos;
14:30 GMT – Canada. Bank of Canada Business Outlook Survey;
18:00 GMT – USA. Federal Budget Balance (Sep).

Tuesday, October 16
21:45 GMT – New Zealand. Consumer Price Index (CPI);
01:30 GMT – PRC. Producer Price Index (PPI);
01:30 GMT – PRC. Consumer Price Index (CPI);
01:30 GMT - Australia. Reserve Bank of Australia Meeting Minutes;

08:30 GMT – United Kingdom. Average Earnings ex Bonus (Aug);
08:30 GMT - United Kingdom. Claimant Count Change;
08:30 GMT - United Kingdom. ILO Unemployment Rate (3M) (Aug);
09:00 GMT – Eurozone. Trade Balance n.s.a.;
09:00 GMT – Eurozone. Trade Balance;
12:55 GMT – USA. Redbook Index;
13:15 GMT - USA. Industrial Production;
13:15 GMT - USA. Capacity Utilization Rate.

Wednesday, October 17
European Union. EU Summit on Brexit;
08:30 GMT – United Kingdom. Retail Price Index (RPI);
08:30 GMT – United Kingdom. Consumer Price Index (CPI);
08:30 GMT - United Kingdom. Core Consumer Price Index (CPI);
09:00 GMT - Eurozone. Core Consumer Price Index (CPI);
09:00 GMT – Eurozone. Consumer Price Index (CPI);

12:30 GMT – USA. Building Permits;
12:30 GMT – USA. Housing Starts;
18:00 GMT – USA. Federal Open Market Committee (FOMC) Meeting Minutes.

Thursday, October 18
23:50 GMT – Japan. Foreign Investments in Japanese Stocks;
23:50 GMT – Japan. Foreign Bonds Buying;
23:50 GMT – Japan. Import/Export;
00:30 GMT – Australia. Unemployment Rate;
00:30 GMT – Australia. Participation Rate;
European Union. EU Summit on Brexit;
08:30 GMT - United Kingdom. Retail Sales;
08:30 GMT - United Kingdom. Retail Sales ex Gas;
12:30 GMT – USA. Initial Jobless Claims;
12:30 GMT – USA. Philadelphia Fed Manufacturing Index (Oct);
13:00 GMT – USA. Federal Open Market Committee (FOMC) Member James Bullard Speaks.  

Friday, October 19
23:30 GMT – Japan. National Consumer Price Index (CPI);
02:00 GMT – PRC. Industrial Production;
02:00 GMT – PRC. Retail Sales;
02:00 GMT – PRC. GDP;
06:35 GMT – Japan. Bank of Japan Governor Kuroda Speaks;
08:00 GMT – Eurozone. Current Account;
08:30 GMT – United Kingdom. Public Sector Net Borrowing;
12:30 GMT – Canada. Bank of Canada Core Consumer Price Index (CPI);
12:30 GMT – Canada. Consumer Price Index (CPI);
12:30 GMT – Canada. Retail Sales;
13:00 GMT – USA. FOMC Member Kaplan Speaks.

Author: Anthony Porter, IAFT Analyst

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