Mid-Day Report: Yen Weakness Continues, EUR/JPY at New Record High

Market Overview | Written by ActionForex.com | Jul 21 08 14:02 GMT |

After consolidating for most of the day, the Japanese dives lower in early US session as the US stock markets opens higher, boosted by better than expected earnings of Bank of America. EUR/JPY made new record high at 169.91 but is so far still limited by 170 psychological resistance. GBP/JPY is also back pressing 213.91 resistance. After all, as mentioned before, the technical picture in most yen pairs suggests that the overall decline in yen is still in progress and, that will very much depends on the development in the equity markets. Earlier today, Sterling was broadly softer on dovish comments from BoE Blanchflower that UK is entering a recession that may last more than a year. Blanchflower said that BoE should act right now and he'd like to see interest rates 'well below' their current level. Sterling is additional pressured after Rightmove house prices index showed deeper drop by -1.8% mom, -2.0% yoy in Jul. Though, firstly, Blanchflower is already a known dove so his comments are not much of a surprise. Secondly, Sterling's near term rise against dollar and yen are still intact technically speaking. Thirdly, it's a big week in the UK with BoE minutes, retail sales and Q2 GDP featured. Sterling regained grounds against Euro and yen later today. Aussie, on the other hand, shrugs off softer than expected PPI report and is the better performer today. Q2 PPI softened from 1.9% qoq to 1.0% qoq and from 4.8% yoy to 4.7% yoy. Markets expected a 5.3% yoy jump in PPI. Analysts are quick to point out the weak correlation between Australia's PPI and CPI data and are still awaiting a strong CPI report to be released on Wednesday. Swiss combined PPI climbed 0.6% mom, 4.5% yoy in Jun, up from prior 1.2% mom and 3.9% yoy and beat expectation of 0.4% mom, 4.3% yoy. US leading indicators dropped -0.1% in Jun, inline with expectation. EUR/JPY Mid-Day Outlook Daily Pivots: (S1) 168.63; (P) 169.06; (R1) 169.89; More. EUR/JPY's rise from 165.32 extends further today and makes new record high at 169.91. Outlook remains unchanged. Rise from 158.60 is still in progress and will take on 170 psychological resistance. Break will encourage further rise to 61.8% projection of 130.60 to 168.93 from 151.71 at 175.40. On the downside, below 168.23 will turn intraday outlook neutral first. In the bigger picture, EUR/JPY's break of 168.93 key medium term resistance indicates multi month consolidation that started at 168.93 should have completed. Rise from 151.71 is still in progress as long as 165.50 cluster support (23.6% retracement of 151.71 to 169.66 at 165.42, 38.2% retracement of 158.60 to 169.66 at 165.43) holds. Further rally should be seen to 61.8% projection of 130.60 to 168.93 from 151.71 at 175.40 after taking out 170 psychological resistance. However, note bearish divergence conditions remains in daily MACD, arguing that upside momentum is still not convincing. Decisive break of 165.50 cluster support will argue that EUR/JPY has failed 170 psychological resistance and made a short term top and deeper decline may follow.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:01	GBP	U.K. Rightmove hse prices M/M Jul	-1.80%	N/A	-1.20%
23:01	GBP	U.K. Rightmove hse prices Y/Y Jul	-2.00%	N/A	-0.10%
01:30	AUD	Australia PPI Q/Q Q2	1.00%	1.60%	1.90%
01:30	AUD	Australia PPI Y/Y Q2	4.70%	5.30%	4.80%
07:15	CHF	Swiss Combined PPI M/M Jun	0.60%	0.40%	1.20%
07:15	CHF	Swiss Combined PPI Y/Y Jun	4.50%	4.30%	3.90%
14:00	USD	U.S. Leading indicators Jun	-0.10%	-0.10%	0.10%
		Japan Market holiday