Daily Report: Yen and Swissy Sharply Lower, Dollar Remains Firm

Market Overview | Written by ActionForex.com | Jul 23 08 07:17 GMT |

The Japanese yen and Swiss Franc spike lower in early European session on a return of carry trade interests. Weakness in yen is broad based. EUR/JPY climbs to new record high at 169.96 and is set to take on 170 psychological resistance. Dollar finally takes out 107.75 resistance, technically confirms the correction from 108.58 to 103.76 has completed. GBP/JPY also takes out 213.91 resistance and jumps to as high as 241.81 so far. As mentioned before, the medium term rebound in yen crosses are still in progress and more upside is still expected in near term. Dollar extended rebound against most major currencies yesterday on hawkish comments from Fed's Plosser who said that Fed should that raise rates "sooner rather than later". Interest rate futures are showing near to 50% chance that Fed will hike in Sep, up from around 20% a week ago. Technically speaking, not that the rebound is dollar against Euro, Sterling and Aussie are still treated as correction only. Meanwhile, the strength in dollar against yen and swissy is arguing that USD/JPY and USD/CHF is resuming the short term up trend (medium term rebound). Australian CPI released overnight jumped from 1.3% to 1.5% qoq in Q2, with yoy rate pushed up from 4.2% to 4.5%, above expectation of 1.3% qoq, 4.3% yoy. The core CPI, RBA trimmed mean jumped to 1.2% qoq, 4.3% yoy, hitting a 17 year high. Nevertheless, Aussie continues to retreat on dollar's broad based recovery. Looking ahead, BoE meeting minutes will be the main focus in European session. Markets expect the minutes to show an 1-8 vote to keep rates unchanged in last meeting. Eurozone industrial orders will be released and is expected to show -1.3% mom fall, 1.9% yoy rise in May. Main focus in US session will be Canadian CPI which is expected to show headline CPI jumping sharply from 2.2% to 2.9% yoy while core CPI is expected to rise from 1.5% yoy to 1.6% yoy. GBP/JPY Daily Outlook Daily Pivots: (S1) 213.08; (P) 213.46; (R1) 214.10; More GBP/JPY's rise from 207.98 resumes and surges to as high as 241.81 today. The break of 213.91 resistance confirms that whole medium term rebound from 192.60 has resumed. At this point, intraday bias remains on the upside as long as 212.82 minor support holds. Further rally is expected for 100% projection of 192.60 to 208.99 from 199.78 at 216.17 first. On the downside, below 212.82 will turn intraday outlook neutral. But further rise is still expected as long as pull back is contained above 207.98 support. In the bigger picture, a medium term bottom is in place at 192.60. Rebound from there is confirmed to have resumed after GBP/JPY takes out 213.91 resistance. Further rally should now be seen to 61.8% retracement of 241.35 to 192.60 at 222.75. On the downside, though, break of 207.98 will now be an important alert that rebound from 192.60 has completed and put focus back to 199.78 support in such case.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
01:30	AUD	Australia CPI Q/Q Q2	1.50%	1.30%	1.30%
01:30	AUD	Australia CPI Y/Y Q2	4.50%	4.30%	4.20%
08:30	GBP	BoE Meeting Minutes (Vote)		1--8	1--8
09:00	EUR	Eurozone Industrial orders M/M May		-1.30%	2.50%
09:00	EUR	Eurozone Industrial orders Y/Y May		1.90%	11.70%
10:00	GBP	U.K. CBI industrial trend Jul		-5	1
11:00	CAD	Canada CPI M/M Jun		0.50%	1.00%
11:00	CAD	Canada CPI Y/Y Jun		2.90%	2.20%
11:00	CAD	Canada CPI core M/M Jun		0.10%	0.30%
11:00	CAD	Canada CPI core Y/Y Jun		1.60%	1.50%