Dollar remains pressured against commodity currencies but regains some ground against European majors in early European session today. Gold consolidates after making new record high of 1045 but is still poised to further rally. The Japanese yen, is strengthening against dollar and European majors in spite of broad based rally in Asian equity markets. Sterling remains soft, drawing no support from better than expected consumer confidence data.

One thing to note is that Gold's break to near high is so far mainly translated to dollar's weakness against commodity currencies only, as helped by unexpected hike from RBA yesterday. While EUR/USD strengthened, it's still kept well below recent high of 1.4842. The question is on whether Gold could sustain above prior high of 1033.9 and whether that would eventually be translated into further weakness in dollar. On the other hand, pull back in gold will likely trigger some meaningful rebound in the dollar against European majors, in particular the weak sterling.

Another major factor in this week's development is yen's regaining strength. USD/JPY, EUR/JPY and GBP/JPY are all feeling heavy today and is possibly set to resume recent down trend. Also, note that while AUD/JPY's rebound was strong, it's still kept well below near term trend line resistance and thus, there is no practical change in the near term bearish outlook yet. Further weakness in yen crosses might help the greenback recovers.

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On the data front, UK Nationwide consumer confidence rose more than expected to 71 in September. BRC shop price was flat in September. Japan leading indicator rose less that expected to 83.3 in August. Swiss unemployment rate rose to 4.1% in September, inline with consensus. Eurozone Q2 GDP is expected to finalize at -0.1% qoq, -4.7% yoy. German factory orders are expected to rise 1.1% mom, drop -20% yoy in August.

USD/JPY Daily Outlook

Daily Pivots: (S1) 88.41; (P) 89.03; (R1) 89.44; More.

USD/JPY's break of 88.59 minor support indicates that recovery from 88.23 has possibly completed already. Intraday bias is flipped back to the downside. Further break of 88.23 will confirm resumption of whole fall from 97.77 and should target key support level at 87.12 next. On the upside, above 89.08 minor resistance will turn intraday outlook neutral again and bring more consolidation. But after all, upside is expected to be limited well below 92.52 resistance and bring fall resumption.

In the bigger picture, USD/JPY's pattern of lower highs, lower lows since 2007 high of 124.13 is still intact, so is the down trend from there. Break of 87.12 key support will pave the way to extend the down trend to next key level of 1995 low at 79.75. On the upside, above 92.52 resistance will indicate that a short term bottom is formed and will bring stronger rebound. But after all, fall from 101.43 is still expected to continue as long as 97.77 resistance holds.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
23:01GBPNationwide Consumer Confidence Sep71686365
23:01GBPBRC Shop Price Index Sep0.00%---0.10% 
5:00JPYLeading Index Aug P83.383.48382.5
5:45CHFUnemployment Rate Sep4.10%4.10%4.00% 
9:00EUREurozone GDP Q/Q Q2 F -0.10%-0.10% 
9:00EUREurozone GDP Y/Y Q2 F -4.70%-4.70% 
10:00EURGerman Factory Orders M/M Aug 1.10%3.50% 
10:00EURGerman Factory Orders Y/Y Aug -20.00%-19.80% 
14:30USDCrude Oil Inventories 2.0M2.8M