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Market Brief
According to the latest flash PMI data, private sector activity in Japan returned to expansion territory at the start of the fourth quarter of 2021. The rise came as the dominant service sector increased activity for the first time since January 2020. Additionally, manufacturers showed growth for the eighth time in nine months, reversing the slight decline seen in September. It was commonly attributed to a drop in COVID-19 cases and the loosening of pandemic restrictions. Japan’s manufacturing sector expanded for the first time since April, beating market analysts’ expectations. The latest figure is 53.0 for October 2021 from a final 51.5 in September.
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The USDJPY is still capped by the 114.50 resistance level but the moving averages and MACD are showing momentum to the upside, which usually leads price action higher too.
At the London open the forex heatmap has flipped to risk-on from yesterdays close of risk-off. The flows out of the yen and the Swiss franc, plus the weaker dollar are moving to the commodity pairs. Last night the US indices pushed towards new all-time highs and in the Asia-Pac session the Nikkei 225, ASX and Hang Seng were all up too.
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The AUDUSD has reversed out of the descending channel from yesterday and we now have a clear level of support for the bulls to work from.
The ActivTrader sentiment indicator is showing that the majority of retail traders are still short the currency pair and as this ratio grows, I foresee higher prices until they get stopped out. There are some key data points coming out later today for the USA and we also have a scheduled speech by Jerome Powell which may be his last before the blackout period. Traders will look to adjust their positions accordingly and there could be some movement in the commodity pairs before the market close.
UK retail sales volume fell by 0.2% in September 2021, following an upwardly revised 0.6% fall in August. Despite the fall in September, volumes were still 4.2% higher than their pre-coronavirus (COVID-19) pandemic levels of February 2020.
Retail sales at non-food stores fell by 1.4% in September 2021, due to numbers out of furniture and lighting stores, and other non-food stores such as sporting goods stores.
Showing how now that we are all back at work, we’re less interested in doing up our homes or exercising. During September 2021, automotive fuel sales increased by 2.9% and this figure is likely to rise for October as we had ques of traffic panic buying. Despite the relaxation of COVID-19 restrictions in summer 2021, in-store retail sales remain low; the proportion of retail sales online rose from 27.9% in August to 28.1% in September, substantially higher than the 19.7% in February 2020 before the pandemic.
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Today could be the day that the UK FTSE100 finally breaks through the resistance that has so far capped prices.
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The GBPUSD still remains in the bull trend for the week and is 0.29% higher over the last 5 trading days. 1.3880 remains my next target with the significant support at 1.3750 crucial for the bulls to defend.
