September Japanese Yen traders are looking for a lower opening this morning based on overnight selling pressure. This comes on the heels of a friendly Bank of Japan quarterly Tankan survey of business sentiment.
Although the key index which measures business sentiment improved on a quarter-to-quarter basis, it was still below the consensus. The negative reaction to the report demonstrates that investors wanted to see more robust improvement.
Earlier in the year when the markets were failing and investors were struggling to find good news anywhere, traders would have been content with any improvement. Now that it appears the global economy is starting to show signs of recovery, investors want to see numbers that at a minimum reflect their expectations. In this case, the Tankan survey failed to meet expectations and traders were encouraged to sell.
The recent gains in the equity markets have also been putting pressure on the Japanese Yen as Japanese investors have been encouraged to shun lower domestic returns in search of higher yields overseas. The September Japanese Yen has been on a consistent break since the U.S. stock markets bottomed early last week.
Overnight strength in the September S&P 500 is helping to put pressure on the Yen overnight as traders speculate that the stock market may have a strong day due to fresh new month/new quarter buying. Gains may be limited, however, because of tomorrow’s U.S. Unemployment Report and Friday’s U.S. market holiday.
Technically, the main trend remains down in the September Japanese Yen as characterized by the lower-top, lower-bottom formation. Recently a new main top was formed at 1.0551. The nearest main bottom is at 1.0125.
Looking at the bigger picture, this market is trading inside of two ranges. The major range is .9898 to 1.0664. This range forms a retracement zone target at 1.0281 to 1.0191. The minor range is 1.0125 to 1.0551 with a retracement zone at 1.0338 to 1.0287. If one combines the two ranges, a price cluster forms at 1.0287 to 1.0281. This zone is likely to be the next downside target.
With the main trend down and the news not living up to expectations, look for traders to press this market into 1.0287 to 1.0281 over the short-run with a technical bounce likely following a test of this price zone.
Treasury markets are feeling downside pressure overnight. The light trading appears to be traders trimming their positions ahead of tomorrow’s U.S. Non-Farm Payroll Report. Look for a slow drift today with a bias to the downside.
Equity markets are called steady to lower. All three indices ran into retracement resistance yesterday at the same time it was reported that U.S. Consumer Confidence dropped. This led to aggressive selling pressure. Since the early morning low, the markets have recovered significantly. This confirms my theory that traders want to buy dips in this market rather than strength. The strongest market is the NASDAQ. The weakest is the Dow. Don’t expect too much movement to the upside unless the September S&P 500 takes out 926.75.
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