Forex News and Events
Japan: inflation target set to be lowered (by Yann Quelenn)
Against all odds, Japan’s PPI Services came in above expectations at 0.6% year-on-year for July. The move is very light and this indicator is not closely watched by market participants. However, as most economic indicators out of Japan, that one delivered a mixed message. Japan is still struggling to enter into a sustainable growth trend, in spite of massive quantitative and qualitative easing program from the BoJ.
Tomorrow Bank of Japan’s Governor Kuroda will speak in New York about Japan’s Inflation target. The central bank promised to hit 2% inflation in 2 years but it seems that this target was too optimistic due to lingering low oil prices. A strong revision of the inflation target to the downside will send the USD/JPY higher as we consider that a small change in the inflation target is already priced in. In addition, we consider that the BoJ is fighting against a strengthening yen as a Fed lift-off fades away. A strengthening currency will open up new discussions for additional monetary easing and even worse, it will threaten the Abenomics growth plan. Therefore, we anticipate the USD/JPY to go back above 120 in the short-term.
Market’s attention has shifted away from fundamentals
Market volatility and fears of global economic slowdown has shifted the Fed rate hike discussion away from US fundamentals. In addition, incoming Fed comments indicates renewed dovishness. Atlanta Fed President Lockhart stated, “the appreciation of the dollar, the devaluation of the Chinese currency and the further decline of oil prices are complicating factors in predicting the pace of growth.” Currently the probability of September launch has dipped below 25%. Todays, durable goods order potentially could refocus the markets attentions on solid US fundamentals. Following a 3.4% jump in Junes headline durable goods orders markets are anticipating a weak -0.5% read. Yet, incoming data including auto bookings suggests upside surprise should be expected. A good read should allow USD to gain against EM and commodity related G10 currencies. That’s said, we need a firming in equity markets to support risk sentiment for any sustainable USD rally.
EUR/JPY - Buying Pressures Continue
The Risk Today
EUR/USD is now consolidating below 1.1500. Over the last month, the pair is setting higher highs. There is a short-term upside momentum. Resistance lies at 1.1871(12/01/2015 high). Support can be found at 1.1017 (18/08/2015 low). In the longer term, the symmetrical triangle from 2010-2014 favored further weakness towards parity. As a result, we view the recent sideways moves as a pause in an underlying declining trend. Key supports can be found at 1.0504 (21/03/2003 low) and 1.0000 (psychological support). We have broken the resistance at 1.1534 (03/02/2015 reaction high). We are entering an upside momentum.
GBP/USD has shifted into a consolidation pattern after slight bullish recovery. However, drift lower indicates persistent selling pressure. Stronger support is given at the 38.2% Fibonacci retracement at 1.5409. Hourly resistance is given at 1.5803 (01/07/2015 high). The short-term structure shows an upside momentum. In the longer term, the technical structure looks like a recovery bottom whose maximum upside potential is given by the strong resistance at 1.6189 (Fibo 61% entrancement).
USD/JPY is consolidating around the 120.00 level. Support is given at 115.57 (16/12/2014 low) which is also a long term support. Stronger support can be found at 113.86 (10/11/2014 low). Resistance lies at 120.40 (25/08/2015 high). A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 118.18 (16/02/2015 low).
USD/CHF is pausing. The pair is trading around the 61.8% Fibonacci retracement. Hourly resistance lies at 0.9506 (25/08/2015 high). Nonetheless we target support at 0.9151 (18/06/2015 low) In the long-term, the pair has broken resistance at 0.9448 suggesting the end of the downtrend. This reinstates the bullish trend. Key support can be found 0.8986 (30/01/2015 low).
