All eyes on Japanese industrial production

Four key markets in focus today.

EUR/JPY

For me EUR/JPY is a buy on dips to 133.30 (spot trading 134.91), or a on a daily close above 135.10. The EUR has had a nice move of late and I expect to see this continue, especially after the overnight comments from ECB member Ewald Nowotny’s that the central bank doesn’t have the tools to deal with the strong EUR. The BoJ will refrain from adding to its liquidity programme tomorrow and the forum for additional purchases probably comes in Q1 2014, just prior to the increase in sales tax. Still, with European banks likely to repatriate funds back to the EMU after selling assets in preparation of the ECB’s asset quality review, the EUR should be supported.  The fact that European banks are paying back longer-term loans to the ECB is supporting the EUR as well. At 10:50 today we get Japanese industrial production and a number above 1.8% could be a JPY negative.

GBP/USD

Cable has respected the June uptrend and a break of the trend could see the 38.2% retracement of the 1.4982 to 1.6261 move at 1.5707 come into play. Key support is also seen at 1.5894 (the double-top neckline), so a break here would target 1.5600. My bias is to stay long, but will revert to a more neutral setting on a closing break of the trend.

Spot gold

On Tuesday we saw gold print a ‘doji’ on the daily chart, signalling indecision in the market. Perhaps a reversal is on the cards after a strong run of late. In US trade we get two important reads on the US economy which could have implications for gold. On one hand we get CPI (ex food and energy), which is expected to grow 1.8% on the year, while we also get the ADP private sector payrolls. A number in the jobs report above 150,000 could be positive for the USD, thus a gold negative.

National Australia Bank (NAB)

NAB closed exactly unchanged and today will be the last day that traders can position for its full-year earnings on Thursday. Cash earnings are expected to come out at $5.93 billion, while annoucing a dividend of 96 cents. Net interest margins are expected to fall to 2.02%, which would represent a nine basis-point fall. Traders will watch for commentary around the possibility of divestment of assets in the UK and even the US, while some are expecting disappointment in its business banking revenues. Valuation wise, NAB is trading on 13.2x 2014 earnings, which is a 7% discount to its peer group and an 8% discount of its own four-year average.

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