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Japanese GDP to Guide Trends

August 13, 2014 | About:
MBM Research

MBM Research

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Over the last few years, we have seen some major fluctuations in the quarterly GDP results that have been released in Japan so it will be important for traders to continue watching trends in this area. Specifically, those that are looking to implement carry trading strategies in the Yen-denominated pairs will need to assess the broader trajectory in these areas as this will be the best way of determining the likely rate policy changes that might be made by the Bank of Japan. Here, we will look at the specific details of these releases.

JPY Gross Domestic Product Annualized – Market Estimate: -7.1% Previous Number: 6.7%

The Cabinet Office of Japan published the Gross Domestic Product (GDP) Annualized data on Tuesday, August 12 at 23:50 GMT. This data gauges the diversification in the price of all goods and services that are included in GDP. This annualized GDP data is one of the major instruments that the Japanese central bank utilizes to assess inflation. Encircling all activities integrated in GDP, this GDP Annualized data is the largest measure of inflation. If this data appears above -7.1% that will be good for the Japanese Yen. These trends have also been confirmed by recent market analysis from ForexAbode.

JPY Gross Domestic Product – Market Estimate: -1.8% Previous Number: 1.6%

At the same time at 23:50 GMT, Japan's Cabinet Office also released the Gross Domestic Product data. It evaluates the change in the inflation adjusted cost of all goods and services generated by the economy. This is also the major gauge of the economy's health and the largest measure of economic activity. If the Gross Domestic Product (GDP) data comes out above -1.8%, it will certainly help the Japanese Yen regain a positive footing.

Stocks still struggle to gain footing

Elsewhere, trading trends in stock markets continue to be dictated by broader risk sentiment. Positive trends here can be viewed as helpful for carry traders as well. There is a strong positive correlation when we look at historical relationships that are seen between stock benchmarks and the Yen-denominated forex pairs. In essence, this means that if the major world stock benchmarks are moving higher, the Yen-denominated forex pairs will follow in the same bullish trend. Here, we look at the latest activity in the FTSE 100 out of the UK, and the German DAX Index.

FTSE 100 Daily Chart:

(Chart Source: CornerTrader)

As its “cousin,” American Stock Index UK FTSE 100 collapsed heavily last week and continued going down this week. The security bounced off previous key support of 6641 last Friday, but the level was broken convincingly this week and intermediate term trend is down now. Key resistance is now where previous key support was at 6641 and intermediate support starts at 6500 level, the low of March. Price is below 200 SMA on all hourly charts and likewise a daily chart, which indicates that the trend in the index has reversed from bullish to bearish. Prices are stalling now at intermediate support.

DAX 8-hour Chart:

(Chart Source: CornerTrader)

Having formed triple top German DAX index has clearly reversed. It has been going down sharply for two weeks now. 9600 key support was not able to hold and was convincingly broken downwards last Friday. The security displays clear downtrend features by making lower lows and lower highs for the third consecutive week. 8908 is key support now, which is the low of March 14. Short term resistance is at 9084 now, which is the low of April 15. Key resistance now is where previous key support was at 9600-20. Prices are stalling now at key support.


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