Intraday Market Thoughts

Yen Extends Slump, China PMI Next

by Adam Button
Feb 1, 2016 0:10

Risk trades roared right into the finish on Friday. The upbeat mood continued early in the week with dollar leading and yen lower. Chinese purchasing manager's indexes are due later. Back in early November, Ashraf alerted clients how the S&P500 and FTSE100 displayed highly similar technical developments to those in early May 2008, alerting that the November bounce would be temporary before further losses ensued. Indeed, the Santa rally of December 2015 proved temporary before the damage unravelled in January. On Friday, Ashraf issued a new set of charts, highlighting a crucial parallel, supported by 4 technical elements. The details are available to Premium susbcribers here.

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Yen Extends Slump, China PMI Next - Us Jp 10 Yr Sprd Jan 30 (Chart 1)

USD/JPY tacked on another quarter-cent of gains in early trading after surging on Kuroda. The BoJ helped to spark the broad risk trade as well and the S&P 500 surged 47 points Friday.

The move may have been overstated by portfolio rebalancing as index trackers were forced to sell bonds and buy stocks to keep allocations balanced after the January rout in stocks.

What could keep the rebound going is dovish rhetoric from the Fed. Kaplan emphasized patience in comments Friday and said it was significant that the FOMC removed the reference to 'balanced' risks in the statement. Williams said he sees rate hikes a 'smidgen' slower. On Tuesday, Fischer speaks in what might offer a hint at what the core of the Fed believes.

The immediate focus is on China in the last week of trading before lunar new year holidays. At 0100 GMT, the official manufacturing and non-manufacturing PMIs are due. The manufacturing one is expected to slip to 49.6 from 49.7. A check on it comes 45 minutes later with Caixin manufacturing PMI. It's expected at 48.1 from 48.2.

An event to watch later in the day is a speech from Draghi at 1600 GMT. There are murmurs that pockets of the ECB are upset with the near-commitment to fresh stimulus in March. If he appears to backtrack, the euro could rally.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -127K vs -137K prior JPY +50K vs +38K prior GBP -47K vs -39K prior AUD -33K vs -36K prior CAD -67K vs -66K prior NZD -5K vs -3K prior

The yen not long underscored the wisdom of a surprise rate cut from Kuroda. The 250 pip rally Friday left virtually every spec short underwater and will leave traders wary against buying yen...for now.

Act Exp Prev GMT
Markit Manufacturing PMI (JAN)
52.7 52.7 Feb 01 14:45
ISM Manufacturing PMI (JAN)
48.5 48.2 Feb 01 15:00
49.6 49.7 Feb 01 1:00
54.4 Feb 01 1:00
48.0 48.2 Feb 01 1:45
Eurozone Markit PMI Manufacturing (JAN)
52.3 52.3 Feb 01 9:00
Fed's Stanley Fischer speech
Feb 01 18:00
Eurozone ECB President Draghi's Speech
Feb 01 16:00

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