Dollar open the week mildly lower as there is some fresh selling in response to last week's weak employment data. But weakness is still limited except versus Canadian dollar. Some analysts noted that with well contained inflation, lackluster wage growth and slowing employment growth, there is no compelling reason for Fed to hike rates in December. On the other hand, Minneapolis Fed president Narayana Kocherlakota was quoted saying that "Given the inflation outlook, given how low inflation is expected to be, to ensure the credibility of our inflation target, taking a more accommodative stance in September would have been totally justified." And, he emphasized that "this is a time to think about adding accommodation, not a time to be thinking about taking it away."
There are a number of central bank activities this week, including RBA rate decision on Tuesday, BoJ rate decision on Wednesday and BoE rate decision on Thursday. Fed will also release FOMC minutes on Thursday. Meanwhile, Sterling will also face the tests from a number of economic data releases including PMI services today and production data on Wednesday.
- Monday: Eurozone PMI services final, retail sales; UK PMI services; US ISM non-manufacturing
- Tuesday: RBA, Australia trade balance; German factory orders; US trade balance, Canada trade balance, Ivey PMI
- Wednesday: BoJ; Swiss foreign currency reserves; UK industrial and manufacturing productions; Canada building permits
- Thursday: Japan current account; Swiss unemployment rate; BoE ; US jobless claims, FOMC minutes
- Friday: Australia home loans; UK trade balance; Canada employment
A technical focus of the week is whether there will be accelerated selling in Sterling. GBP/JPY dropped to as low as 180.64 last week and barely managed to hold on to 180.36 support and turned sideway. A break of 180.36 will extend the fall fro 195.86 and target key support level at 174.86. EUR/GBP breached 0.7421 resistance last week which suggests resumption of rebound from 0.6935. And a break of 0.7482 resistance could trigger stronger to medium term retracement level at 0.7650.
Meanwhile, GBP/CHF continues to hold above 1.4599 support for the moment but there is no strength for sustainable rebound. Focus will remain on 1.4599 support. Decisive break there will resume the fall from 1.5408. And more importantly, the medium term rise from 1.1856 should be confirmed as completed and deeper fall could be seen to 1.3814 key support level ahead.