Japan's Reliance on the World Pays Off As Exports Jump (Euro Open)

Japan dominated Asian headlines after its Current Account Balance surged to a 13-month high and its Machine Orders jumped by the most since April of 2008. A 6.3% rise in exports sent the Nikkei rallying 1.21% by 00:00 EST. Price action on the Japanese Yen initially reacted favorably, but ultimately lost its footing.

Key Overnight Developments

• Japanese Machine Orders Rise by Most in 14 Months
• Current Account Balance in Japan Surges on Exports


Critical Levels

Euro and Pound action against the U.S. Dollar opened the week similarly to each other after labor figures came in stronger than expected for the American country at the end of trading on Friday. Both pairs found themselves trading tangent to the 200-hour moving average with the slow stochastic oscillator suggesting both EUR/USD and GBP/USD rising from “oversold” conditions.

• Japanese Machine Orders Rise by Most in 14 Months• Current Account Balance in Japan Surges on Exports
Critical LevelsEuro and Pound action against the U.S. Dollar opened the week similarly to each other after labor figures came in stronger than expected for the American country at the end of trading on Friday. Both pairs found themselves trading tangent to the 200-hour moving average with the slow stochastic oscillator suggesting both EUR/USD and GBP/USD rising from “oversold” conditions.
Asia Session HighlightsJapanese Machine Orders, when excluding ships and utilities, June rose by 9.7% in June, beating expectations of a 2.6% increase in the figure. The latest release is the highest of such since April of 2008. Last month’s release saw orders for such industrial needs contract by 3.0%. Most of the increase in demand in June came from abroad, growing 43.8% on the month. The domestic public sector weighed in only slightly. Overall, when including when including orders for ships and utilities, total orders rose only 2.3% with private demand actually slipping by 15.9%. But it is important to strip the metric of boat orders because such expenditures are generally used for military or freighters. Still, it may somewhat worrisome to see such a substantial gap between the headline figure and the figure with the two excluded items. Such a great magnitude in difference may indicate that orders for the two products are generally quite large.
Japan's Current Account Balance, when adjusted for fluctuations in the Yen exchange rate, surged to it's highest level since May 2008 to 1798.8 billion Yen. The news comes as demand for Japanese industrial products from abroad jumped ahead. In fact, the demand for machinery from other countries made a leap of 43.8% in the month alone. In it's third rise in four months, the Trade Balance made a sizable move ahead to 602.2 billion Yen. With a 6.3% increase in its exports, the Asian country may soon be moving out of recession. But much of this good news comes on the back of conditions abroad. The risk here, then, is that if other countries experience a downturn then Japan will surely go down just as quickly.
Home Loans in Australia got a boost in June as well, rising 1.1% after the sharp upward revision of 6.2% in the month prior. Despite posting a 9th straight month of growth, the economy still remains weak. Estimates for the latest figure had called for a much stronger 1.8% increase in the metric. It is thus no wonder that Investment Lending in the same month declined for the first time since February. Perhaps the Australian economy isn’t as resilient as many had originally hoped. May’s such lending was also weaker than initially thought after it was revised down 0.6 percentage points to 1.8%.

Euro Session: What to Expect

The light European calendar offers some insight into the current direction of the region’s economic environment. French Industrial Production, expected to rise 0.2% in July, will be coming off of the largest monthly gain in the figure since November of 2005. This current estimate may be substantially conservative; afterall, the previous month’s expectations called for a 0.2% contraction. Clearly such estimates proved to be poor. Previously released data may also show that French production may be on a spree. The Purchasing Manufacturer’s Index of Manufacturing rose to its highest level since June of 2008. Manufacturing Orders in the country are also expected to rise on the month. Like the industrial production figure, manufacturing orders performed unusually strong in the previous month.

Asian markets rally on good U.S. data; Dollar, stronger

Asian markets have advanced on Monday, supported by the unexpected decline on U.S. unemployment in the U.S on Friday. The Dollar trades at higher levels.

Tokyo Nikkei Index rose 1.4%, reaching its highest level since October last year, while Hong Kong's Hang Seng Index rose 2.2%. South Korean Kospi Index remained little changed, whole markets in Australia and India rose.

Investors' confidence has been buoyed by positive employment data in the U.S.The unemployment rate declined in July for the first time in the last 15 months, showing signs of stabilization on U.S. labour markets, which is considered a crucial element for the improvement of consumer spending, which, is one of the biggest contributors of the nation's GDP.

Dollar rallies on employment recovery

EUR/USD dropped on Friday from levels around 1.4350 to levels right above 1.4150 right after Non-Farm payrolls data was released. During Asian session, the Pair has edged up from opening levels around 1.4180 to 1.4215, although the Euro has eased and trades at 1.4200 at the time of writing.

The Pound dropped aggressively from the 1.7000 resistance area after the release post Non-Farm payrolls, to find support at 1.6150, and bounce during Asian session to a maximum level at 1.6715 to drop back to 1.6670 at the moment of writing.

USD/JPY soared on Friday from 95.00 to 97.70 resistance area on the back of July's Employment Report, although the pair has eased during Asian session, to trade in range between 97.00 and 97.40.

forex forecasts: Forex Market Outlook on Majors

Rate : 1.6360

Cable's intra-day breach of last week's low at
1.6391 suggests decline fm 1.7044 to retrace upmove
fm 1.5983 has resumed n further weakness to 1.6338
n then twds 1.6311 wud be seen, however, o/sold con
dition shud limit downside ot 1.6286.

Sell on recovery with stop as indicated, break
may bring rebound to 1.6450/60...

Range Forecast
1.6350 / 1.6380

Resistance/Support
R: 1.6436/1.6485/1.6513
S: 1.6338/1.6311/1.6286