Essentials: Yen Under Water over Higher Equity Markets, ADP On Tap

Equity markets are higher today, recuperating a good amount of the last few days’ decline. On average they are up 1.85% on the day. The rally is led by gains in the Auto and Retail sectors, it’s due to bargain hunters lifting prices. The Australian Dollar is gaining vs. the Euro and Dollar on the higher equity markets, while the Japanese Yen is under water against most on the same theme. U.S. ADP Employment report is on tap this afternoon – a good reading is needed to keep the mood buoyant.

Upcoming Risk Events (BST)

• 13:15: U.S. ADP, est. 190K
• 13:30: Canada GDP, est. 0.7% YoY
• 14:45: Chicago PMI, est. 53
  

• 09:30: U.K GDP 2Q, prints 2.4% YoY vs. est. 2.6%
• 10:00: E.U. CPI, prints -0.1YoY vs. est. 0.01%
• 10:00: E.U. Unemployment rate prints 11% vs. est. 10.9%

Forex

• The Yen is clearly in the red as stock markets in Asia bounce. GBPJPY is bullish above 181.40 and we might reach 183.20
• The Australian Dollar is also higher against the Euro and U.S. Dollar on the same theme.
• AUDUSD is bullish above 0.6985 and looks to be targeting 0.7100. EURAUD is bearish below 1.6080.
• U.S ADP Employment report probably needs to print close to 190K or above to keep the Yen soft and AUD strong
• Fed members; Yellen, Bullard and Dudley are due to speak
• Today’s soft E.U. CPI suggests ECB QE will be in place until 2017, or they might decide to alter their current program in the months ahead

Equity markets

• Equity markets are higher as the European auto sector rebounds
• Some strategists are saying today’s lower E.U. inflation reading increases the likelihood of more ECB QE. Hence it makes more sense to be bullish than bearish European equity indices at current levels
• We note while Equity markets are higher after the last few days declines, the overall trend remains bearish. We remain bearish on the idea of a slower Chinese growth.
• S&P 500 is bearish below 1951,5 we expect sellers to emerge near Monday’s breakout level of 1908
• FTSE 100 is bearish below Friday’s high of 6133, bearish traders will probably add to shorts near the 6050 level

• WTI is flat with no major change or bias. Today’s EIA Crude Inventory report is expected to show no change according to a Reuter’s poll.
• Gold is expected to consolidate as price seems to be stuck in a triangle, if connecting the August and September high, and the July – September low. Horizontal support is at the September low of $1097.70 and resistance at the current September high of 1156.70.