Asian Stocks Rise, JPY Weakness Broadens

Asian Stocks Rise, JPY Weakness Broadens


The Asian markets turned risk-on amid expectations that the new Japanese PM Abe will boost the Japanese economy. On Monday, Shinzo Abe had stated that he would revise the BoJ law if the inflation target is not brought up to 2% in the January meeting.

As a reaction, JPY had started to weaken in illiquid market conditions as Nikkei was closed. Finally on Tuesday and Wednesday sessions, the markets gave confirmation of their support to Abe. Nikkei index recovered from Dec. 21th collapse below 10,000, added 1.41% and 1.49% over the last two days, and finally closed at 10,230.36.

USDJPY broke the 85.00 resistance as predicted in our previous reading and hit 85.44 (year-high). The currency pair is trading above the oversold limit of 70% since Dec. 12th and is currently above its upper Bollinger band. GBPJPY is trading at 137.68, while EURJPY hit the year-high of 112.69 this morning. Over the expectations for a recovery, crude oil slipped above 89.00 and is currently trading at week highs, while Gold fell as far as 1,651.62.

As Christmas holidays come to an end, the negotiations over the "cliff" should accelerate as the deadline approaches. We believe that the problem will not be solved in one shot and the markets are cautious. The S&P500 index extended its losses by 0.24%, while Nasdaq and Dow Jones futures decreased by 0.39% and 0.54% respectively.

"The cliff is better than a 50% probability and then comes the debt ceiling! Dysfunctional Washington is bad for risk assets" posted an influent bond fund manager on Twitter. Today’s calendar is very light, the volumes are expected to remain low, the volatility high.