Yen Weakens on CPI, Bernanke watched
Yen weakens across the board today on lower than expectation inflation data. USD/JPY powered to above 117 level while EUR/JPY is now pressing record high of 149.72. Jul national CPI rose 0.2% yoy only, much below expectation of 0.5%. Jun’s inflation was also revised down from 0.6% to 0.5% yoy. BoJ has openly emphasized that the rate of tightening will be slow and by small increments many times. Even though Fuikui and Mizuno have stressed that there is no fixed schedule on next rate hike, and ruled out market’s expectation of no more hike this year, the chance for another hike looks slim with the current inflation figures.
Elsewhere, Euro and Swiss Franc remains range bound against dollar while Sterling weakens slightly. Fed Chairman Ben Bernanke will give the opening speech at a Kansas City Federal Reserve Bank symposium in Jackson Hole, Wyoming today. His speech will be closely watched for sign of another hike this year. However, with Bernanke’s recent silence since last monetary policy meeting, we don’t expect something new from him.
On the data front, prelim CPI in Germany is expected to remain steady mom and increase 1.8% yoy. UK Q2 GDP is expected to increase 0.8% qoq and 2.6% yoy.
USD/JPY
Daily Pivots: (S1) 116.26; (P) 116.42; (R1) 116.66;
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As expected, USD/JPY’s rally resumed by breaking above 116.83 again. At this point, intraday bias will remain on the upside as long as USD/JPY stays above 116.74 minor support and further rise towards 117.39 resistance is expected to follow. As discussed before, break of 117.39 will be the first signal of resumption of medium term rally from 108.99. In such case, focus will be on resistance zone between 117.87 high and 100% projection of 113.96 to 116.74 from 115.18 at 117.96). Firm break will confirm such case and bring further rise towards 118.88 resistance.
On the downside, below 116.74 will turn intraday outlook consolidative first. But short term bias will still remain on the upside as long as retreat is contained above 116.07 support. Further rally is still in favor as long as this support holds.
In the bigger picture, USD/JPY continues to stay with established range of 113.39 to 117.87. While the whole rally from 108.99 has completed with a medium term top formed at 117.87, USD/JPY will be treated as in 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. Break of 117.39 resistance will be the first signal of medium term rally resumption. On the downside, firm break below 113.39 cluster support will indicate a much deeper decline is underway 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 is the founder and CEO of
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