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There was a big jump in the pair on Friday on the back of the bumper non-farm payrolls reading. A blockbuster reading (204,000 versus 120,000 expected) drove the USD higher against the majors. USD/JPY traded to a high of 99.22 and still continues to hold around the 99 level. That sharp reversal last week seems to have really washed out sellers above 99 and the pair could be gearing up for a bumper run. Analysts feel December tapering is definitely a possibility and no doubt this jobs reading will see talk of tapering ramp up.
The big move in USD/JPY is set to bolster the Nikkei at the open today. We are currently calling the index up 1.2% at 14,263 with exporters likely to lead the way. Out of Japan today we have current account and bank lending data due out at 10.50 AEDT. Further evidence of a weaker yen lifting the economy could be positive for Abenomics and Japan’s equities today. Near-term resistance for the Nikkei is at 14,500 where we could see some consolidation.
While US jobs data resulted in an AUD/USD drop on Friday night, some solid economic readings from China over the weekend should help the AUD get off to a fairly good start to the week. The pair slipped to a low of 0.9353 and I expect some bumper China economic readings to lift risk sentiment today. On Friday China released a much better-than-expected trade balance number. This was followed up by an impressive industrial production reading (10.3% versus 10% expected) while inflation is under control after CPI came in at 3.2%. This effectively gives the PBoC room to act if the economy shows signs of slowing. At the same time better-than-expected industrial production and trade balance readings show that the economy is in good shape. We could see AUD/USD trade back above 0.94 today and I continue to expect consolidation closer to 0.95. On the local data front, we have home loans data due out at 11.30 AEDT today.
The sharp rise in the USD on tapering talk did gold no favours at all as the precious metal dropped below 1300 to a low of 1281. Gold bottomed at 1251 in mid-October and I feel that’s the level to look out for in the near term. Traders are likely to look at selling any rallies back towards 1300.