Risk-on Amid Higher US Indices and Unexpected CN Trade Deficit - 10.4.2013

Risk appetite has been improving after US equities closed in positive light with Dow Jones Industrial Average index rising to record high of 14673.26, up by 0.4%, the S&P also closed higher by 0.35% at 1568.61, equities gained amid positive earnings start. At the same time Chinese Trade Balance unexpectedly exhibited a deficit of $0.88 bln in March compared to $15.23 bln surplus in February. Trade deficit was mainly due to surprising jump of imports by 14.1% in March while exports increased by 10%, less than expected. Yesterday’s unexpected reduction in Chinese CPI and today’s unexpected Trade deficit, increase significantly chances that the People’s Bank of China would add stimulus, thus further supporting risk-on. The Australian dollar was well supported against the US dollar on improved risk appetite, but mostly was underpinned by Chinese trade data. Since top trade partner of Australia is China, traders expect Aussie demand to grow proportionately to advancing Chinese imports. The currency pair advanced from recent support at 1.0472 to upside hurdle at 1.0516. The US dollar index weakened, retreating back to 82.25 ahead of the FOMC meeting minutes inducing the USDJPY in a consolidation around 99.21. The Japanese Yen dropped broadly the previous days against its counterparties after BOJ’s unprecedented quantitative and qualitative easing measures. Due to the latter, EURJPY provided excellent returns to the long traders, surging from handle at 119.41 to the recent upper barrier at 130.08, in other words rose since last Thursday by more than 9.0%.