Most markets are quiet this morning, with U.S. equities still trying to recover from Friday’s liquidation. The Nikkei is actually up almost 2%, as market participants are perhaps expecting the BOJ to ease next week. Japan September exports dropped at sharpest y/y pace since the February 2011 earthquake/Tsunami.
S&P 500 futures are holding near the 1420 level, with more corporate earnings reports out this week likely to determine short-term directions. We think the Greece situation still being unresolved is pressuring equity markets. However, we think the fact that oil looks weak (trading below $90) can serve as a bullish buoy for the stock market. We are surprised the S&P 500 has fallen this much, and look for the rally approaching 1500 to resume.
We focus our technical analysis on the JPY/USD. The yen has broken through a multi-month uptrend line starting in June. 128 has been the upper resistance area that this market could not hold above. 127 was the next support that this market has also dropped below. We note that our next major support level is 124. In May and June of 2012, buyers came in very strong when the yen reached 124. We will see how the market reacts if it gets there once again. The weak JPY currency was also aided on more verbal intervention comments from BOJ Governor Shirakawa and Economy Minister Maehara.
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