Japan will be in focus today with the all-important CPI print due out. USD/JPY has been relatively sidelined over the past 24 hours at around 97.30, and we sense it could be in for a volatile end to the week on the back of this data. Given inflation is one of the BoJ’s key metrics, then this CPI report will be the main event of the week for USD/JPY. Once again we’ll be looking to see if higher imported energy costs are skewing the CPI reading. While there’s been all this talk about Abenomics working, CPI ex-food and energy actually continues to decline. Regardless, a disappointing read will only see talk of further stimulus at the end of the month ramp up. I will be eyeing a break out of the current trading range of 97.20 to 97.60 (to the upside or downside) for a momentum trade.
RMD is in for a tough start today after a disappointing earnings report saw its stock drop double digit figures in US after-hours trade. The stock was priced for perfection with its locally-listed stock trading near record highs yesterday in anticipation of a blockbuster result. While I expect to see RMD pull back at the open today, it remains in a very strong uptrend and therefore buying the dips might be the better strategy. There is support in the $5.50 region which could present buying opportunities.
The local market is within striking distance of this week’s highs, a break of which would see it trade at fresh five-and-a-half-year highs. Yesterday the banks led a rally and should they exhibit similar strength today we could be in for another solid day. For the week the market is up 1% and it seems like we will be adding to this at the open with a call of 5396. The question is will the momentum carry it through 5400 this time, or will resistance kick in and result in profit taking.
The single currency remains resilient, with EUR/USD still testing the 1.38 handle. Yesterday’s PMIs were quite subdued and failed to provide a catalyst/platform for the pair to extend its gains. However, the mere fact that it didn’t pull back on the mostly disappointing data suggests traders are still quite bullish on EUR/USD. We get the sense the asset quality review might prompt a round of repatriation by the banks in the region and underpin the euro. Later today we have the money and credit aggregates for September, the German IFO for October and Italian retail sales for August to look out for.
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