Nikkei off to the races

Nikkei off to the races

By Tim Waterer (Senior Trader, CMC Markets)

The Nikkei has been operating in a different stratosphere to that of other markets in the wake of the BOJ ‘game plan’, which has produced a stark contrast to the far more cautious nature of traders elsewhere in the lead up to the next US employment yardstick. Kuroda has hit the ground running as BOJ Governor and his aggressive approach appears for now at least to have really struck a chord when it comes to investor hopes in the Japanese economy. However while the Nikkei was off to the races, other Asian markets appeared to be joining the dots by taking the softer reads on the ADP and initial jobless claims indicators so far this week as perhaps pointing towards a print to the downside on the broader Non-Farm Payrolls report.

The move lower in Australian equities showed some signs of position squaring leading up to the US jobs report , with traders not exactly being filled with confidence by the indicators out of the US so far this week. US data has been on a good run in recent months however this week we have seen manufacturing and employment prints come in short of the mark which has raised some questions over the rate of the recovery and this has given traders reason to pause. While the mining stocks posted some pretty decent gains today, this was offset by weakness among the financials which contributed to the subdued finish by the ASX200 to cap the week.

It is all about the Yen in the FX market and this has produced some sizable moves among the cross rates. While the Australian Dollar has been sliding lower today against the greenback, the AUDJPY rate has been holding above the 100 level with traders attracted by the yield differential on offer. The carry trade against the Yen is a favoured pick by investors given the easing measures announced by the BOJ. But back to the performance of the AUD against the USD. After a few unsuccessful forays to 1.05 this week the AUDUSD rate has eased with traders erring on the side of caution ahead of the US jobs data tonight. We would likely need to see a positive payrolls report which spurs risk assets for the AUDUSD to have another attempt at the 1.05 level this evening.

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