Dollar recovers after ISM and Core PCE
ISM manufacturing index increased to 54.7 in July from 53.8, beating expectation of 53.7. June core PCE index rose 2.4% yoy up from upwardly revised 2.2% in May and being the highest since Sep 2002. PCE deflator increased 3.5%, high than expectation of 3.3%. Personal income and spending in Jun came inline with consensus of 0.6% and 0.4% respectively. Some volatility was caused by misreport of the core PCE but dollar quickly strengthened after clarifications. Further dollar strength is seen against yen after strongly than expected ISM but against European currencies, dollar is still bounded in tight range.
Treasury Paulson on the U.S. economy and challenges to the global economy today. Focus will be on his comments on Yuan’s appreciation. Two U.S. senators has stepped up pressure on China last week and asked Paulson to set a deadline of Sep 30 for yuan appreciation or they will press legislation to impose a 27.5% duty on Chinese goods.
RBA will be making rate decision in the coming Asia session which is expected to raise rate by 25bp to 6%. But this should be priced in already after strong CPI released last week.
USD/JPY
Daily Pivots: (S1) 114.27; (P) 114.54; (R1) 114.91;
USD/JPY’s recovery continues and break of 114.87 minor resistance together with 4 hours MACD turned above signal line indicates a short term low is formed at 114.18 already. USD/JPY has recovered further to mentioned 115.29 resistance as expected.
A this point, as long as USD/JPY stays above 114.55 minor support, risk of further rebound remains and further rise to 4 hours 55 EMA (now at 115.65) cannot be ruled out. Above 116.03 cluster resistance (50% retracement of 117.87 to 114.18 at 116.03) will indicate that the whole fall from 117.87 has likely finished and retest of this high could follow. On the downside, below 114.55 will suggest recovery has completed and fall from 117.87 has resumed for 113.39 cluster support (50% retracement of 108.99 to 117.87 at 113.43).
In a bigger picture, USD/JPY will still be treated as in larger sideway consolidation only as long as it’s kept above 113.39 cluster support and further rally is still in favor, from medium term point of view, towards 118.88 resistance. However, firm break below 113.39 will start to argue that the whole decline from 121.38 (which made a low with three waves down to 108.99) has resumed and medium term outlook will be turned bearish for a test of 108.99 low first.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
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.