The Japanese yen fell and the Japanese stock market rose after Prime Minister Shigeru Ishiba announced his intention to resign over the weekend.
The yen fell 0.7% against the dollar at one point as concerns over political instability were seen as reducing the possibility of the Bank of Japan raising interest rates. The Japanese stock market rose, driven by the depreciation of the yen and the possibility of more government stimulus measures. US Treasury prices fell slightly, ending a three-day rally.
Shigeru Ishiba’s resignation plan ended his tenure marred by a crushing election defeat and left the market confused about Japan’s fiscal direction. His departure also intensified investors’ uncertainty in the weeks before a new leader emerges.
“Markets are concerned that the next leader of the Liberal Democratic Party will be more inclined towards fiscal expansion,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “Ultimately, the yen will still face downward pressure in the short term.”
The Nikkei 225 index rose by 1.8%, and the Topix index increased by 1.2%. The MSCI Asia Pacific index went up by 0.5%.
The benchmark S&P 500 index fell on Friday as the US jobs report was weaker than expected, heightening concerns about a rapid cooling of the labor market. US stock futures then edged higher in Asia.
If the yen depreciates too rapidly, foreign exchange traders need to consider the risk of persuasion from US officials. Although traders expect that the Bank of Japan will postpone its next interest rate hike due to political uncertainty, on the other hand, the dollar is weakening because the Federal Reserve is expected to discuss at least a 50 basis point rate cut this month due to weak US employment data.
CBA strategists including Joseph Capurso wrote in a note to clients that the US dollar could test its year-to-date lows again. “Given the focus on the labor market in recent remarks by Federal Reserve Chair Powell, market participants may raise expectations for a 50 basis point cut in the federal funds rate next week.”
Technical analysis:
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Gold: The operation reminder given by our plugin last Friday was very clear, to place a buy stop order at 3560.97. Since then, the price has continuously broken through to around 3600. The profit-to-loss ratio has reached nearly 8 times. Currently, the price is consolidating at a high level around 3580/90. For today, it is advisable to mainly focus on bullish signals and it is recommended to buy on a blue breakthrough and pullback. For detailed positions, please consult the plugin.
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Nasdaq: Last Friday, we suggested a buy stop operation at the blue line breaking through 23,713.87. This move could potentially achieve a profit-to-loss ratio of at least 5:1. For intraday trading, we arranged for a low buy near 23,650 and a buy on a pullback after a break through 23,750. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: After releasing the bearish news of increasing production by 137,000 barrels per day, the price began to stop falling and rebound. Within the day, we quickly retraced to confirm the support and then rebounded. The key to this operation lies in the confirmation of the support this morning; on the other hand, the target is first to see the gap on last Friday. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key financial data and events to focus on:
22:00 US Conference Board Employment Trends Index for August
