Greenback making a move against the JPY and Oil under pressure with demand concerns.

Greenback Striking Back Against the JPY?

USD/JPY is attempting to have a third straight day of gains as the market turns attention back to the fact that the FED is being aggressive with interest rate hikes and that the Bank of Japan is refusing to adjust its loose monetary policy.

At the start of the week, the JPY had the upper hand over the greenback due to its allure as a safe haven, as well as the belief in the market that the FED in the future will be less hawkish in their rate hikes due to the US GDP reading last week of -0.9%.

However, with more hawkish talk coming from the FED this week and some positive US data, such as a better US ISM Service PMI being announced at 56.7 versus the expectation of 53.5, as well as the tension subsiding in relation to Nancy Pelosi’s visit to Taiwan, the market has shifted its focus to the fact that US interest rates are at 2.50% and Japan’s remain at -0.10%.

Currently trading at 133.42, USD bulls are eyeing the weekly highs – which the currency reached yesterday.   With the USD/JPY hitting a 24-year high back in June, there will be traders looking once again at those highs.  

US job data may be the key for the USD/JPY to hit those heights with the US Initial Claims due today and, more importantly, the US Non-Farm Payroll due tomorrow at 12:30pm (UTC).

With the ongoing debate on whether the US is indeed in recession, the naysayers have always fallen back to a robust labor market in their defense. The NFP is expected to show an increase of 250K new jobs, which is lower than a previous reading of 372K last month. A stronger number could potentially help the USD gain more ground against the JPY.

Tixee’s Global Head of Market Research, James Trescothick, will be holding a “tixee Live WatchAlong ” on the Non-Farm Payroll announcement decision starting at 12:20 pm (UTC), available live via YouTube and Facebook.

 

Non-Farm Payroll(Friday)                Expectation: 250K                  Previous: 327K

 

Key Areas of Interest:

After yesterday’s high of 134.54, the next potential key resistance level for the USD/JPY is around 134.70 which is the 50 sma on a daily chart. Potential support level is around 133.36 which is the 100 sma on a 30 minute chart.

Oil Traders Turning their Focus to Demand issues instead of Supply Concerns?

Oil prices were on the back foot at the beginning of the session, with both benchmarks falling to their weakest levels since February. They have since recovered slightly, with WTI Oil currently trading around $89.66 and Brent currently trading around $95.2. 

There are clear signs, however, that despite the OPEC+ disappointing the market yesterday by announcing they will only increase production by 100,000 barrels per day (which is the lowest ever increase), the market is beginning to have concerns about the fall in demand.  

With recession fear weighing heavy on the market’s mind, the recent Energy Information Administration(EIA) announced an increase in crude stocks of 4.5 million barrels versus the expectation of 600,00 barrels and that gasoline stocks had increased by 200,000 barrels not fallen by 1.6 million barrels as the market had expected.

This is illustrating a potential slow down in demand in the US, which is the world’s biggest consumer of oil.

Also putting pressure on oil prices is the recent announcement that Iranian and US officials are planning to travel to Vienna to resume talks about Iran’s nuclear programme, which means the chances of sanctions against Iran being removed is again on the table – which has held back  Iranian oil exports.

Key Areas of Interest:

For WTI oil, there is a potential resistance at $90.85. This is the 50 sma on a 30 minute chart and a potential support around $89.54, which is the bottom band of the bollinger bands  – again on a 30 minute chart.


Written by James Trescothick, Global Head of Market Research



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