Yen weakens as growth slows
Japanese yen’s retreat against dollar extends further today. As widely expected, BoJ benchmark interest rate unchanged at 0.25% on unanimous vote as economic growth moderated more than expected. Released earlier, Q2 GDP in Japan increased 0.5% yoy, decelerated from previous quarter’s 3.1% growth and much below expectation of 1.8%. Also, slowdown in US economy will be closely monitored by the BoJ for effects on exports from Japan. The growth data is inline with BoJ’s stance that tightening will be made slowly and with small increment. Even though policy board member Mizuno and Suda have said that another hike cannot be ruled out this year, based on current economic situation, we don’t see a high chance yet.
Later today, retail sales and import/export prices from US will be closely watched. Economists expect US retail sales to rise 0.8% in July, with ex-auto sales increasing 0.5%, rebounding from June’s 0.1% drop in headline sales and 0.3% rise in ex-auto sales. Import prices are expect to increase 0.8% in July with export prices increasing 0.3%.
Daily Pivots: (S1) 114.75; (P) 115.17; (R1) 115.67;
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USD/JPY’s rebound extends further to 115.82 as expected. As this point as long as USD/JPY stays above 115.11 minor support , intraday bias remains on the upside and further rise towards 61.8% retracement of 117.87 to 113.96 at 116.38 should follow. Below 115.11 will turn intraday outlook consolidative but it will take a break below 114.66 to indicate the whole rebound form 113.96 has finished, otherwise, risk remains on the upside.
In a bigger picture, the whole rally from 108.99 has completed with a medium term top formed at 117.87 already with bearish divergence condition in daily MACD and RSI and medium term rising trend line firmly broken. However, USD/JPY will 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, only happens later, towards 118.88 resistance.
But, 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 111.31 low first and possibly 108.99 later.
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.