Stocks rise and the yen slides
USD/JPY => The pair rises above 133.00
Exxon Mobil => The stock trades 60% higher this year
EUStoxx50 => The index rises above 3800
USD/JPY rises to a 2-decade high
USD/JPY trades at a 20-year high of over 133.00, boosted by central bank divergence.
The RBA hiking rates by a larger than expected 50 basis points highlighted how dovish the BoJ is compared to most other major central banks, pulling the yen lower. Weaker than forecast household spending and slow wage growth mean that the BoJ is unlikely to deviate from its accommodative monetary policy anytime soon.
Overnight data showed that the Japanese economy contracted less than anticipated in Q1. Meanwhile, the USD is pushing higher on expectations that the Fed will act aggressively to rein in inflation. Today there is no high impacting US data, so sentiment is likely to be the driving force behind the pair.
| Japan GDP Q1 | Actual: -0.5% (-0.5%) | Previous: -1% |
Where next for USD/JPY?
On the 4-hour chart, USD/JPY traded within a falling wedge before breaking out at the start of June.
The price has since formed a series of higher highs and higher lows, taking out the previous 20-year high of 131.45 as it potentially heads towards 135.00, the February 2002 high. The RSI has moved deeply into overbought territory, with some consolidation before further gains, although given the strength if the fundamentals any consolidation could be minimal.
On the downside, support can be seen at 131.40, and it would take a move below 129.60, the June low, to negate the near-term uptrend.
XOM.US traces oil prices higher
Exxon Mobil rallied 4.5% in the previous session, making it one of the top performers.
The stock trades up 60% so far this year and trades at a 52-week high following a broker upgrade to “outperform” from Evercore; the price target was also raised to $120, up from $88. The rally in the stock comes as it traces oil prices higher. Oil prices have surged 60% so far this year after Russia’s invasion of Ukraine and Western sanctions tightened supply considerably.
Goldman Sachs upwardly revised its Q3 oil price forecast to $140 per barrel, up from $125. Higher oil prices mean more profits for oil majors. Watch for the EIA crude oil stockpile data due later today
Stoxx50 rises ahead of GDP data
EUStoxx50 closed higher on Tuesday despite mixed data.
German factory orders came fell, defying expectations of an increase. Meanwhile, eurozone investor morale improved considerably more than forecast, painting a more upbeat outlook. However, that could change once the ECB starts raising interest rates. Today the index is rising again amid risk-on trade after a positive close on Wall Street.
Attention is now moving to German industrial production figures and Eurozone GDP data, which are expected to confirm the preliminary reading. Slower than expected growth could unnerve the markets, particularly ahead of tomorrow’s ECB rate decision, and given recent concerns that central bank tightening will stifle growth, raising risks of stagflation.
| Ger. factory orders April
EZ investor sentiment EZ GDP Q1 |
Actual: -2.7% (1.5%)
Actual: -15.8 (6.8) Expected: 0.3% (0) |
Previous: -4.2%
Previous: -22.6 Previous: 0.3% |
Support can be found at 3750 (weekly low) and 3600 (May 15 low).
Resistance for the pair can be seen at 3858 (weekly high) and 3950 (April 21 high).
