Intraday Market Thoughts

G7 Begins in Tokyo, EUR Holds Above 1.29

by Adam Button
Oct 12, 2012 0:56

A jobless claims number that was too-good-to-be-true was the result of a faulty adjustment. The euro was the top performer while the yen lagged. Japanese leaders will be hoping the yen lags further after the G7 meetings beginning today. Thursdays edition of Ashrafs Premium Insights is out, with new trading ideas on EURUSD, EURJPY, GBPUSD, AUDUSD, CADJPY,oil and CADJPY. In addition to the trading ideas from Thursdays Premium Insights, there are detailed chart analysis on multi-timeframe stochastics on GBPUSD. Existing trades on gold and silver and intact. See direct link below.

Initial jobless claims fell to a four-year low of 339K, much better than the 370K reading expected. Unfortunately, the euphoria over the number quickly faded when officials said the fall was due to a large drop in one state that didnt use the normal quarterly adjustment.

The euro reached as high as 1.2951, more than a full cent from the overnight lows, but later faded back to 1.2925. Other risk trades followed a similar pattern. The S&P 500 was as high as 1443 but closed flat at 1433.

The Australian dollar continued higher after the upbeat jobs data but stalled after a Bloomberg report saying that Chinas biggest banks are resisting government pressure to lower borrowing rates. The report suggested profitability was the motive but fear about defaults in the slowing economy could also be a factor. In any case, slower lending will curb growth and spill over to Australia.

The yen was broadly weaker on intervention talk and reports that a Japanese telecom company is in talks to buy Sprint, which is the third largest US telecom provider. Japanese officials have been encouraging companies to use the strong yen for M&A but this is the first sign that companies are heeding the call.

The focus will remain on Japan in Asia-Pacific trading. The Japanese corporate goods price index will be released at 2350 GMT; expectations are for a 1.4% y/y decline.

The top event will be the G7 meeting in Tokyo. Japan is working to win support for currency intervention. It will be difficult for Japan to argue excessive volatility with USD/JPY vols at the lowest levels of the year. Officials hinted at Plan B on Thursday, saying they could act even against US objections.

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