- The USD / JPY climbs moderately on risk aversion.
- The improvement in the dollar comes despite the drop in equity and treasury yields.
- US NFP loss 0f 701.00 dominates the statistics
The US / JPY ended up higher over the week, although it remains well below its mid- and late-March highs as moderate risk aversion continues to prevail in the markets. From Wednesday’s low at 106.92, the pair rose Thursday and Friday to close at 108.54.
Once again, the action and the markets were almost exclusively based on the US dollar and driven by the evolution of the pandemic and its global economic repercussions.
The number of jobs in the United States dominated the statistical week. The almost record loss of 701,000 jobs last month, only the drop of 800,000 in March 2009 was more significant, is only the beginning, as the number of jobs in the United States follows the almost instant market disaster of work caused by the coronavirus pandemic.
The dollar maintained its position of security choice for the markets as the difficult economic news from the United States and Europe took shape. Over the week, the US currency gained 0.5% against the Japanese yen, 1.62% against the Canadian dollar, 3% against the euro and 2.8% against the Australian dollar. It was only in opposition to the British pound that it lost 1.47%.
The USD / JPY is between the extremes of 112.00 and 111.00 during the third weeks of February and March and the lowest of 103.00 on March 9 and 10. With this rapid and recent movement, there are many lines of support and resistance to consider during periods of non-core trade.
The recovery of the dollar also occurred despite losses in global equities. Japanese stocks fell 8% from Friday to Friday, with the Nikkei 225 ending at 17,820.
US stocks had another negative week on economic troubles as it lost 360 points, 1.69% to 21,502 on Friday. It fell 2.7% on the week, its third losing week in four, and 26.2% on the year. It is 28.8% lower than its historic record of 29,568 on February 12 of this year.
The S&P 500 ended down 1.51% on its third negative day in four. Over the week, the average also lost 2.08%, its third week of decline in the past four. Over the year, it lost 22.97% and is 26.66% below its record of 3,393.52 from February 19. The two averages could easily surpass 2008 as their worst year when the S&P lost 38.5% and the Dow 33.6%.
Bond yield and WTI
Japanese sovereign yields changed little over the week. The 10-year JGB closed on Friday March 27 at 0.013%, reached 0.023% at the end of Tuesday and ended the week at 0.003%.
US Treasury yields and commercial interest rates continued to decline as the Federal Reserve purchase program began after the March 15 emergency meeting that pushed prices up bonds and yields. The 10-year closed at 0.599% on Friday, down from the opening of 0.676% on Monday. The 2-year yield lost 1 basis point over the week, starting at 0.228% on Monday and ending at 0.227% on Friday.
The average rate on a 30-year fixed mortgage fell to 3.33% last week, down 17 basis points. Combined with the previous week’s decline, it was the largest two-week decline since December 2008 when the Fed surprised financial services with its very first mortgage-backed securities purchase program.
West Texas Intermediate (WTI, Clc1) had its best week in history with an increase of 31.75% and an increase of 11.93% on Friday to finish at $ 28.34. However, its worst performance since the start of this futures contract was down 53.59% over the year.
Japanese statistics from March 30 to April 3
The unemployment rate in Japan remained unchanged at 2.4% in February. The preliminary reading of industrial production (Y / Y) in February was -4.7% slightly better than the forecast of -5.5%, but remained the fifth consecutive negative month. Over the month, it increased 0.4% with predictions of 0.1% and a gain of 1% in January. Retail trade rose 0.6% in February, far ahead of projections of -0.9%, annual trade rose 1.7% on an estimate of -1.2%.
The Bank of Japan’s Tankan survey for the first quarter was better than expected for the outlook for large manufacturers, -11 against -14, and in the index -8 against -10, better for non-manufacturing industries in the ‘index 8 against 6, and worse in the outlook at -1 against 2. While the Tankan is a widely followed indicator, the information for the first quarter is completely outdated in the current situation.
Japanese statistics April 6-10
The coincidence index for February is expected to fall to 95.1 from 95.2 and the main economic index to slide to 90.4 from 90.5.
The Cabinet Eco Watchers survey for March. It was 24.6 in outlook and 27.4 in current situation in February.
March Cabinet Office consumer confidence. It was 38.4 in February
The producer price index for March should fall by 0.7% on the month and 0.1% on the year, against -0.4% and 0.8% in February.
Conclusion of Japanese statistics
Industrial production suffered a five-month streak of consecutive losses in February before the global closure of the virus, and although retail trade in February and the Tankan survey were better than expected, nor did they report the impact of China’s economic closings in March.
Three statistics from last month, the Eco watchers Survey, consumer confidence and the PPI will put some numbers on what should be a bad time for the Japanese economy.
US statistics March 30-April 3
The Redbook index for the week of March 27 increased 6.3% over the year and 1.3% over the month compared to 9.1% and 1.7% in February.
Conference Board consumer confidence fell to 120 in March from 132.6 in February, exceeding the estimate of 110, but the Conference Board warned of likely future declines.
ADP’s private payroll lost 27,000 jobs, less than the forecast of -150,000, but the difference was attributed to the delay in reporting.
The manufacturing PMI was better than expected in March at 49.1, 45 had been forecast, but returning the sector to contraction. New orders fell to 42.2 after 49.8 and employment slipped to 43.8 after 46.9.
Challenger said layoffs for March jumped to 222,288 from 56,660 in February.
Initial unemployment claims for the week of March 27 wiped out all expectations at 6.648 million, almost doubling the estimate of 3.5 million and making the two-week total at 9.931 million.
Non-farm payrolls fell 701,000, capturing more layoffs last month than expected, and the surge is expected to continue in April and March. The unemployment rate (U-3) went from 3.5% to 4.4% and the underemployment rate (U-6) went from 7.1% to 8.7%. Average annual hourly wages increased from 0.1% to 3.1%.
American statistics from April 6 to 10
Redbook index of comparable store retail sales in the week of April 3.
FOMC report from the March 15 unplanned meeting which reduced the rate of federal funds from 1% to 0.25%.
Initial unemployment claims for the week of April 3. After two weeks totaling 9.931, this is the statistic to watch.
Michigan’s consumer confidence index, preliminary for April 75, is expected to drop from 89.1 in March.
Conclusion of American statistics
The speed of the collapse of the labor market has left most statistics completely obsolete. For the coming week, the FOMC minutes will give an indication of the information and concerns of the Fed governors in the middle of the month. The initial jobless claims will be the most followed and instructive of the depth of labor market pain and an indication of the statistical debacle likely to ensue.
USD / JPY technical outlook
Relative Strength Index (RSI) has been almost a regular sine wave in the past two weeks, as the USD / JPY movement has increased and decreased fairly steadily, leaving the reversion of the RSI to exactly 50 neutral this week. (50.3436).
The longer 100-day and 200-day moving averages are also neutral for the same reason, with the 21-day period showing slightly higher gains on Thursday and Friday.
The extensive movement of the past six weeks has left many lines of support and resistance with the reservation that, in fundamental markets, technical considerations are easily canceled out by market developments. and news.
Resistance: 109.00, 109.35, 109.60, 110.20, 110.80, 111.25
Support: 107.85, 107.10, 106.60, 105.70, 105.00, 104.50, 104.00, 103.00
USD / JPY sentiment survey
The dollar’s decline in security could begin in this week’s opinion poll. Of the three faces of the bull last week in all the deadlines, we have one left, that of a week. The month moved to neutral and the quarter became bearish.
When the markets are subjected to extreme risks taken into account by external factors, the flow of news ends up getting used to it and becomes less able to displace trade without ever more disastrous developments. A similar development occurred in the fall and winter of 2008-2009. The question is: will the news get worse?