ACT: Mid-Day Report: Sentiments Getting Support from US Q3 GDP
Mid-Day Report: Sentiments Getting Support from US Q3 GDP
Disappointing earnings reports weighed down on market sentiments for most of the day and provided some boost to dollar and yen. But sentiments seem to be supported by GDP report from US as European indices turned positive while US futures pared some earlier losses. The US economy expanded at a pace of 2% annualized rate in Q3, comparing to expectation of 1.8% and Q2's 1.3%. Meanwhile the GDP price index rose 2.8% versus consensus of 2.0%.
Euro extended its pull back against dollar and yen on news that Greece's program is off track. An unnamed European official was quoted saying that there is no chance Greece could bring debt down to 120% of GDP in 2020. Instead, its would be at 136%, under a positive scenario of "a primary budget surplus, a return to economic growth, and privatization". And, it's estimated that additional EUR 30b additional financing is needed. Another official was quoted that Greece needs EUR 16-20b in additional funding. Meanwhile, the current situation is that IMF is pushing of Official Sector Involvement while Germany is "strictly against" it.
Released from Japan, national CPI dropped -0.1% yoy in September, staying in deflation while Tokyo CPI dropped -0.4% yoy. Though, both are better than expectation of -0.2% yoy and -0.5% yoy respectively. After all, as Japan remains in deflation, the expectation for BoJ to expand monetary stimulus next week in its October 30 meeting is higher. There are still much to be done to achieve the 1% inflation target. And if it happens, it will be the second time BoJ expand stimulus in two months.
Other data released today saw Swiss KOF leading indicator unchanged at 1.67 in October. New Zealand trade deficit cam in narrower than expected at NZD -791m in September. German Gfk consumer sentiment for November improved to 6.3. Import price dropped -0.7% mom in September.
It looks like USD/JPY has formed a short term top at 80.37 with mild bearish divergence condition in 4 hours MACD. Intraday bias is now turned neutral for more consolidations. But downside would likely be contained by 38.2% retracement of 77.93 to 80.37 at 79.43 and bring another rally. Above 80.37 will target 80.61 resistance (50% retracement of 84.17 to 77.13 at 80.65). Sustained break there will open the way for 84.17 resistance next.
In the bigger picture, firstly, there is no sign of trend reversal in USD/JPY yet and the larger down trend from 124.13 is still expected to continue. Nonetheless, consolidation pattern from 75.56 should extend for a while below 85.51 first. In any case, we'd stay bearish as long as 85.51 resistance holds and expect an eventual downside breakout.
