Consolidation was largely seen in the currency and commodities markets on Monday as caution became the general theme due to the developing story in Japan. Equities however remain under considerable strain on many bourses as investors react nervously to what is perceived as a deepening crisis regarding the nuclear situation in Japan. The Nikkei bourse in Japan declined rapidly early this morning when the Japanese government announced that problems persist. The essential mantra for traders going into today’s market sessions will need to be ‘caution, calm, and the capability’. Caution because markets may turn swift suddenly. Calm because the news is rapidly developing and reality must be separated from fear. And capability as positions are taken with a perspective that weights short term versus long term outlooks.
There was not much in terms of major economic data released yesterday, except for the intervention from the Bank of Japan stating that they would push a huge amount of JPY into their economy. The Europeans released Industrial Production and the number came in with an outcome of 0.3% compared to the expectation of 0.4%. Today the German ZEW Economic Sentiment reading will be published and it carries an estimate of 16.2. The U.S. will release the Fed’s FOMC monetary statement this evening. The German data and the statement from the Federal Reserve in the States would typically be important. However the gaze of investors worldwide will continue to be the significance of developing sentiment generated from Japan and the reaction that the major bourses internationally turn in as they conduct their trading.
The USD traded very tentatively against the EUR on Monday and the story was much the same against the GBP. The JPY continued to actually get stronger and finds itself within the higher values of its realm against the Greenback. The AUD did trade lower when the final tally was recorded. The currencies have for the most part shown a rather startling inclination to remain within known ranges. And perhaps this is a by-product of the tentative nature that exists within financial institutions due the questions that are being asked about the impact of the Japanese story.
It also must be taken into consideration that the Middle East and North Africa situation continue to make news. Though the developments have been put on the ‘back burner’ by media as they focus elsewhere, the questions that have emerged about stability from the world’s largest oil producing regions must be contemplated. The price of Crude Oil remained consolidated on Monday and the question for traders is where sentiment will take the commodity when ‘answers’ are found.
The Japan story will remain critical today. The Japanese stock market is largely closed at this point today and it is now up to other bourses and investors to react to the declines that were experienced on the Nikkei. While a tragedy in Japan is a reality, the question investors must ask is if reactions have been overly cautious. Investors may prefer to stay ‘liquid’ today as risk aversion remains high, but certainly there will those who step forward and participate as they gauge the developing news.
It has been four days since the Japan earthquake and investors worldwide are still coming to grips with the situation, and the fact that details are still coming forth rapidly certainly means that today’s trading worldwide could be volatile.
Written by bforex.com
