Japanese Trade Surplus Data Shows Impact of Strong Yen on Exports

Very little in the way of any meaningful price action thus far on Monday, with all currencies consolidating their latest gains against the buck and contemplating the possibility of yet another round of strength. The Euro has been exceptionally well bid over the past several trading sessions, with technical traders scratching their heads after the market finally ended a sequence of 9 consecutive daily higher lows on Friday to warn of a healthy corrective pullback, before totally negating this sequence-break and rallying to yet another multi-day high just shy of 1.3500.


The gains in the currency market continue to be driven by the latest Federal Reserve monetary policy statement which has signaled to the markets that the central bank is ready and willing to implement yet another round of quantitative easing should it be necessary. Since the decision last Tuesday, weak housing data has been the key stand out, and should economic data in the US disappoint some more over the coming weeks, then we will surely see another round of accommodation.


On Monday thus far, we have already seen a much weaker than expected Japanese trade surplus which shows the dramatic negative impact of the stronger Yen on exports and could start to scare away some of the Yen bulls. Also generating some volatility in the Yen has been the fiscal half-year end price action and hedging, and rumors of bankruptcy from Japan’s third largest consumer lender. Meanwhile in China, despite some fresh highs for the Yuan against the USD, the end result was rather unimpressive with the Yuan depreciating at the fixing. Finally, UK Hometrack Housing was weaker than the previous print, while in the Eurozone, the IMF said that it saw German GDP growth at 3.3% in 2010, and 2.0% in 2011.


Looking ahead, the European economic calendar is extremely light, with only Eurozone M3 money supply (0.2% expected) out at 8:00GMT. As a result of the anemic calendar, market participants will undoubtedly look to broader global macro themes for directional bias. US equity futures are pointing to a mildly firmer open, while commodities are also bid with gold consolidating just under its recently set record highs and critical barriers by $1300.
Written by Joel Kruger