Dollar Steady After Trade Balance, Euro at New Record Highs
Dollar makes another record low against Euro today. However, the widened trade deficit in US, which rose to -$60b,
hasn’t fueled further selling in the greenback. Instead, dollar is still holding on to the near term support against sterling and swissy, with EUR/USD capped below key medium term resistance. It seems like more consolidation should be seen as traders take profits on dollar short positions ahead of tomorrow’s Retail Sales. On the other hand, the Canadian dollar is boosted higher after larger than expected trade surplus of 5.9b as well as faster than expected rise in new housing price index at 1.1%.
The Japanese yen remains weak today, edging to another record low against Euro too. BoJ left rates unchanged at 0.5% overnight in an 8-1 decision with Mizuno dissented and argued for a hike. Opinions on whether BoJ will raise rates in Aug is divided. Some viewed Fukui’s press conference as an effort to remove the barriers for another rate hike as he said that Q2 GDP, which is due for release before the Aug meeting, will not be a factor to the rate decision. Fukui remains confident on the outlook of the economy and expects inflation to rise in the long term. Also, Fukui is noted to have expressed the concern one-way bets against the yen in currency markets. However, the fact that only one member dissented the hike is not doing any help to enforce the speculation of an Aug hike yet. The yen traders will continue to listen to the coming comments from BoJ officials, as well be sensitive to anything related to the carry trade theme.
Daily Pivots: (S1) 167.10; (P) 167.75; (R1) 169.00; More
EUR/JPY’s rally from 166.49 continues today by breaking through 168.50 resistance, reaching as high as 168.65 so far. Further rally is expected to follow towards next target of trend line resistance at 168.94 first. Break will encourage stronger rally to 100% projection of 161.49 to 166.94 from 164.23 at 169.68. BElow 167.82 will turn intraday outlook consolidative first.
In the bigger picture, whole medium term rally from 130.60 is still in progress and the interpretation remains unchanged.. First wave up ended at 143.60, subsequent correction ended at 137.167. The third wave up ended at 159.63 while fourth wave correction has ended at 150.75. Rise from there represents the final advance in this structure. With 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 taken out decisively, next medium term upside target will be 100% projection of 137.16 to 159.63 from 150.75 at 173.22.
On the downside, break of 166.49 support will warn that rise from 161.49 has completed, probably with bearish divergence condition in 4 hours MACD and RSI. Short term rising trend line (now at 164.61) will then be in focus and break will argue that whole rally from 150.75 has completed too. In such case, deeper decline should be seen.
Shing-Ip Tsui 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.