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On July 7th, Daiwa Securities released a research report stating that the latest channel inspections show that the retail sales value (RSV) of the sporting goods industry slowed quarter-on-quarter in the second quarter of this year, and the monthly volatility of RSV increased, further reducing the short-term predictability of Xtep (01368.HK). Meanwhile, the transformation of Xteps core brand will disrupt its wholesale business and require upfront investment, potentially diluting Xteps short-term revenue and profit margins. Although the Saucony brand can continue to maintain high growth, the core Xtep brand may face challenges from slower growth and increased competition. The bank lowered its earnings per share forecast for Xtep this year by approximately 12%, and reduced its target price from HK$5.2 to HK$3.9, downgrading its rating from "Outperform" to "Hold".Indian government officials said India will supply Indonesia with BrahMos cruise missile systems and Astra air-to-air missiles.Japans May coincident economic index rose 0.4% month-on-month, down from 1.3% in the previous month.Bernstein: Launches coverage research on SpaceX (SPCX.O) with an "Outperform" rating and a target price of $239.On July 7th, Citigroup issued a report stating that Kingboard Laminates (01888.HK) announced a price increase. Given the larger-than-expected increase, Citigroup raised its earnings forecast and target price from HK$120 to HK$130, maintaining a "Buy" rating. Citigroup believes the recent share price pullback was mainly due to fund rotation from higher-valuation AI hardware stocks to non-technology sectors, Metas sale of excess computing power, and the reduction of shares by its largest shareholder, Hallgain. However, Citigroup views this pullback as a buying opportunity. The bank indicated that subsequent catalysts include a higher-than-expected average selling price of electronic fiberglass cloth, a potential for a better-than-expected first-half profit warning, and the markets expectation of upward revisions to financial forecasts after the first-half results are released. Citigroup raised its 2026-2028 earnings forecasts by 11-12%, to RMB 9.607 billion, RMB 14.275 billion, and RMB 19.523 billion, respectively. Furthermore, the stock had previously been added to Citigroups upside catalyst watch list, expiring on August 2nd.

USD/JPY Rate Reversal Takes Shape Ahead of 50- Day SMA

Cory Russell

Jun 02, 2022 18:16

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TALKING POINTS FOR THE JAPANESE YEN

As it carves a sequence of higher highs and lows ahead of the 50-Day SMA (127.03), the USD/JPY looks to have reversed, and the exchange rate may follow the upward slope in the moving average as it clears last week's range bound price action.

RATE REVERSAL IN THE USD/JPY TAKES FORM AHEAD OF THE 50-DAY SMA

Following an unexpected jump in the US ISM Manufacturing survey, the USD/JPY has risen to a new weekly high (130.19), with the exchange rate gaining over 2.5 percent since the start of the week, as it seems to be tracking the rise in US Treasury rates.


The improvement in the ISM survey should keep the Federal Reserve on track to raise interest rates because it indicates a healthy economy, and Governor Christopher Waller's recent remarks suggest the central bank will shift gears again in 2022, as the permanent voting member of the Federal Open Market Committee (FOMC) favors "tightening policy by another 50 basis points for several meetings."


While speaking at an event hosted by the Institute for Monetary and Financial Stability, Governor Waller expressed his support for keeping "the policy rate at a level above neutral" as the central bank struggles to control inflation, adding that "the strong labor market can handle higher rates without a significant increase in unemployment" (IMFS).


As a result, the upcoming update to the US Non-Farm Payrolls (NFP) report, which is expected to add 325K jobs in May, may fuel speculation for another 50bp rate hike, and it remains to be seen if Chairman Jerome Powell and Co. will forecast a steeper path for the Fed Fund rate at the next interest rate decision on June 15, when the central bank is set to release the updated Summary of Economic Projections (SEP).


Until then, the differing trajectories of the FOMC and the Bank of Japan (BoJ) may keep USD/JPY afloat, but the retail sentiment tilt is certain to endure as traders have been net-short the pair for the most of 2022.


According to the IG Client Sentiment report, 31.51 percent of traders are presently net-long USD/JPY, with a short-to-long ratio of 2.17 to 1.


The number of traders who are net-long is up 0.16 percent from yesterday and up 23.49 percent from last week, while those who are net-short is up 4.70 percent from yesterday and down 4.98 percent from last week. The increase in net-long positions comes as the USD/JPY makes a series of higher highs and lows, while a drop in net-short interest has helped to relieve congestion, with just 26.83 percent of traders net-long the pair last month.


As a result of the increase in US rates, USD/JPY may continue to climb ahead of the NFP data, and the exchange currency may continue to follow the positive slope of the 50-Day SMA (127.19) as it approaches the moving average.



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