CPI and Bernanke in focus

Market’s focus today will be on Ben Bernanke’s testimony today. Fed has toned down the hawkishness in their last FOMC statement by saying that the need fore another hike will be based on upon incoming inflation and economic data. While Fed is still facing the dilemma of inflation and growth, it was clear that Fed has focused more on inflation before last hike in June. Yesterday’s sharp rise in core PPI suggest that we could see a stronger headline CPI increase today. With recent surges in oil prices, the Fed, based on their stance in fighting inflation, may be left with no choice but delaying the pause. Bernanke’s remarks to these issues will be highly focused today.

Jun US CPI, to be released before Bernanke’s testimony, is expected to increase 0.2% mom, pushing the
YOY rate to 4.3%. Meanwhile core CPI is expected to increase 0.2% mom and 2.6%
YOY. June housing data will also be released today with building permits expected to drop further to 1.92M while housing starts to fall to 1.91M.

BoE MPC minutes will be released in European session today. Sterling has been firm over the past week and has outperformed other majors on the back of strong CPI inflation released yesterday. Any shift of balance in hawks and doves shown in today’s minutes could inspire another rebound in GBP/USD.


Daily Pivots: (S1) 116.80; (P) 117.19; (R1) 117.69;


USD/JPY’s rally from 113.39 continued yesterday and reached as high as 117.58 so far. At this point, even though 4 hours MACD’s turning flat is suggesting a short term top is around the corner, intraday bias will still remain on the upside as long as USD/JPY stays above 116.70 support. Further rally towards 118.88 cluster resistance (78.6% retracement of 121.38 to 108.99 at 118.73) is still expected to follow.

Touching of 116.70 will indicate a short term top is formed. Outlook will turn consolidative in such case, with risk of pull back towards 4 hours 55 EMA (now at 115..89). However, as long as downside is contained by 114.99 support, consolidation should still be brief and rally from 113.39 should resume sooner rather than later.

In a bigger picture, break of 116.69 cluster resistance (61.8% retracement of 121.38 to 108.99 at 116.65) indicates medium term rally from 108.99 has resumed towards 118.88 cluster resistance (78.6% retracement of 121.38 to 108.99 at 118.73). While, corrective fall from 116.69, which has finished at 113.39 already, could be treated as a correction to the whole rebound from 108.99, break of 118.88 will likely have multi year falling trend line (now at 119.25) taken out too and further rally to 100% projection of 108.99 to 116.69 from 113.39 at 121.09) could follow.

USD/JPY 4 Hours Chart - Forex Newsletters, Forex Outlook, Forex Review, Forex Signal

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Shing-Ip Tsui (Shing) is the founder and CEO of www.ActionForex.com. ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.