Mid-Day Report: Dollar Firm But Yen Even Stronger

Market Overview | Written by ActionForex.com | Sep 11 08 13:14 GMT |

A string of economic data are released in early US session but markets pay little attention to them. The greenback remains generally firm across the board, except versus the yen. EUR/USD breaches 1.39 level briefly just after taking out 1.4 yesterday. AUD/USD is staying comfortably below 0.8. More importantly, USD/JPY seems clearing the the mixed picture and dives to 106.37 in early US session on anticipation of lower open in the US equity markets. EUR/JPY dives further to below 148 level. Though, note that dollar's strength against sterling and canadian dollar is still not convincing yet and more consolidation might be seen there in near term. US jobless claims remain elevated at 445k, staying above the four week moving average which climbed from 439k to 440k. Trade deficit surged sharply to -62.2b in Jul, back above -60b level on stronger rise in imports by 3.9%. Export rose 3.3%. Import prices dropped much more than expected by -3.7% mom in Aug, dragging yoy rate to 16%. Canadian trade surplus came in narrow than expected at 4.9b in Jul. New housing price index rose 0.1% as expected. In the Treasury Committee Hearing, BoE Governor King said that prospect for growth has deteriorated and sharp reduction in money and credit is bearing down the UK economy. King stress that the bank "will not and cannot solve the shortage of funding in finance bank lending" over the long term. The know dove Blanchflower said that growth prospect have deteriorated in the past month and warn that there will be a large increase on unemployment. The 50 bps cut from RBNZ to bring OCR down to 7.5% was a surprise to the markets which expected a 25bps cut only. In the accompanying statement, RBNZ Governor Bollard said that "medium-term inflation pressures" is expected to "ease" and it's now appropriate to move to a less "restrictive stance". The cut is "warranted in light of tightness of credit conditions" and the time to take to "affect actual interest rates faced by households". Aussie was dragged down by Kiwi despite a strong employment report which saw 14.6k growth. More surprisingly, unemployment rate dropped from 4.3% to 4.1% in Aug. USD/JPY Mid-Day Outlook Daily Pivots: (S1) 106.86; (P) 107.40; (R1) 108.19; More. USD/JPY weakens further to as low as 106.21 in early US session and at this point, intraday bias remains mildly on the downside for testing 105.52 support. Break will confirm recent fall from 110.66 has resumed and reaffirm the bearish outlook. Deeper decline should then be seen towards 103.76 support first. On the upside, while above 108.18 will turn intraday outlook neural again, break of 109.18 is needed to invalidate prior bearish view, indicating firstly that correction from 110.66 has completed, secondly, whole medium term rally from 95.77 is still in progress despite the brief break of trend line support last week. Otherwise, further downside is still in favor. In the bigger picture, the break of medium term trend line support (95.77 to 103.76) indicates that whole medium term rebound from 95.77 should have completed with at 110.66 with bearish divergence condition in daily MACD. Further break of 103.76 support will confirm this case. Also, note the three wave structure of the rise from 95.77 to 110.66 argues that it's merely a correction in the larger down trend. Hence, in such case, deeper medium term decline should be seen to retest this 95.77 low. On the upside, however, above 109.18 will firstly suggest that fall from 110.66 is probably completed. Secondly it will dampen the bearish case and suggests that rise fro 95.77 is probably still in progress. Above 110.66 will encourage further rise to 61.8% retracement of 124.13 to 95.77 at 113.30.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
21:00	NZD	RBNZ rate decision Sep	7.50%	7.75%	8.00%
23:50	JPY	Japan Machine orders M/M Jul	-3.90%	-4.30%	-2.60%
23:50	JPY	Japan Machine tools orders Y/Y Jul	-4.70%	-4.50%	9.70%
01:30	AUD	Australia Unemployment rate Aug	4.10%	4.40%	4.30%
01:30	AUD	Australia Unemployment change Aug	14.6K	5.0K	10.9K	18.7K
06:00	EUR	Germany WPI M/M Aug	-1.80%	-0.60%	1.40%
06:00	EUR	Germany WPI Y/Y Aug	7.40%	8.80%	9.90%
08:45	GBP	MPC Treasury Committee Hearings
12:30	USD	U.S. Trade balance (usd) Jul	-62.2B	-58.0B	-56.8B
12:30	USD	U.S. Import price index M/M Aug	-3.70%	-1.80%	1.70%	0.20%
12:30	USD	U.S. Import price index Y/Y Aug	16.7%	20.20%	21.60%	20%
12:30	USD	U.S. Jobless claims	445K	440.0K	444.0K	451K
12:30	CAD	Canada Trade balance (cad) Jul	4.9B	5.6B	5.76B	5.64B
12:30	CAD	Canada Imports Jul	39.4B	N/A	37.40B	37.7B
12:30	CAD	Canada Exports Jul	44.3B	N/A	43.16B	43.3B
12:30	CAD	Canada New housing price index Jul	0.10%	0.10%	0.10%
14:35	USD	U.S. Natural Gas Storage		88B	90B
18:00	USD	U.S. Fed budget Aug		-106.2B	-117.0B