Asian Session – EUR/JPY falls to 22-month low as Japanese PM’s advisor says the currency too weak
The yen rallied on the absence of important news today, after an advisor to the Japanese Prime Minister said that the currency was too weak and that it had room to strengthen. The comments were surprising in that the prevailing view in the market was that the Japanese government saw a weaker yen as a key method of boosting its economy. Although this is unlikely to be a change of policy, it does introduce some uncertainty as to how much lower the yen can be pushed and that this could spark a debate inside Japan about the wisdom of driving the currency down.In combination with some positive statistics the previous day, the EUR/JPY cross rate made a fresh 22-month low around 126.20, whereas USD/JPY was also struggling and fell below 120 once again as it traded as low as 119.62.
EUR/USD was also weak, trading under 1.0550 on concern about possible negative developments out of Greece. The country and its creditors had apparently made little progress during recent negotiations about the reforms the country should undertake in exchange for additional loans.
The Australian dollar was holding near the 76 US cents level following an upbeat business sentiment survey out of the National Australian Bank. Tomorrow’s key data out of China (GDP, Industrial Production, Retail Sales), will likely impact the aussie.
Looking ahead, the key figure that will be awaited is Retail Sales for March out of the United States. Retail Sales are expected to have rebounded by 1.0% month-on-month compared to the 0.6% contraction of the previous month. Bad weather may have disrupted US economic activity early in the year so a rebound will be expected. Before US retail sales, UK inflation for March will be the main statistic out of Europe. Overall inflation for the country is expected to stay around 0%, but core inflation is expected to be doing better at 1.2% year-on-year.
Technical Analysis – GBP/USD downside bias strong after reaching 5-year low
GBP/USD fell to the lowest level since 2010 on Monday, touching 1.4564. The pair failed to break above resistance of 1.5008 and now the bias remains to the downside.
The bearish market structure is highlighted by the falling tenkan-sen and kijun-sen lines, as well as the market being below the Ichimoku cloud. Also the RSI is below 50 in bearish territory. The outlook will remain bearish unless there is a rebound back above 1.5551 (the high of February 26). Otherwise, there is scope to target 1.4228 (2010 low) and then 1.3503 (2009 low). GBP/USD has been making lower highs and lower lows since falling from the mid - 2014 peak of 1.7190.