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Strong yen pressures Nikkei, weak dollar boosts commodities

By Margaret Yang, CMC Market

Equities –Asian markets were mixed yesterday. The Topix was down 0.61% as the yen re-tested its 17-month low of 107.64 and then finished the day at 107.95 against the greenback. A stronger yen is putting pressure on company earnings in a market that is dominated by exporters. This, together with rising doubts about Abenomics which seem to have failed to pull the country from the shadow of deflation, sent the Japanese market lower. This is likely to form a negative feedback loop, whereby the slump in equity markets will dent public confidence and curb spending.

On the other hand, the Shanghai Composite finished the day 1.64% higher, led by healthcare and mining sectors. The HK-Shanghai link has registered net northbound flow of 1.34 billion CNH, the highest in a week. China’s March CPI was unchanged at 2.3%, lower than the market consensus of 2.5%.  The PPI was down 4.3%, narrowing from a 4.9% drop in Feb. Singapore’s STI advanced marginally higher, with the financial sector leading the move. The STI is expected to be range bound before Singapore’s Q1 GDP data to be announced this Thursday morning.

Commodities – Gold stands above the immediate resistance level of $1,940 for the first time in two weeks and is now trading around $1,255.00. The next resistance levels are $1,270 and $1,286. WTI crude oil gained 1.5% and closed at $40.36. The next key resistance level is $41.69. Arabica coffee has retraced to its 200 day moving average of 120.0 and attempted to find support around here. Coffee prices surged 12.7% in March and are now facing a consolidation.

FXUSD/JPY dipped to as low as 107.639 before it came back to 108.010 this morning. The recent yen volatility will probably put pressure on policy makers at the next BOJ meeting on 27-28th Apr. USD/CAD broking down below the key support level of 1.3000, which may lead to a test of 1.2863. EUR/USD has been hovering around the 1.1400 level for the last week. German CPI data to be announced this afternoon will probably be a fresh catalyst to the market.

CSOP FESE China A50 ETF

market12042016

Key Technical levels to watch:

  • Up-trend channel formed
  • Immediate resistance levels: 11.52, followed by 11.93
  • Triangle pattern appeared under Pattern-scanning function. Breaking out above the triangle will lead to more upside and probably test key resistance level at 11.93

About the author

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.