Dollar attempted to resume rally earlier today but failed ahead of this week's high against euro and sterling. European majors are generally supported by positive news from Europe. Meanwhile, Japanese yen and swiss franc are trying to build up some strength in early US session after poor jobless claim number from US, which jumped back to 500k level. Canadian dollar pares earlier gains after leading indicators rose less than expected by 0.4% mom in July while wholesale sales dropped -0.3% mom in June.
Sterling was lifted by solid data earlier today. Public sector net borrowing dropped more than expected to GBP 3.2B in July, indicating that the coalition government is on course to reduce the record budget deficit this year. In addition, retail sales rose more than expected by 1.1% mom in July, indicating solid recovery in consumer demand. M4 money supply rose 0.4% mom, 2.3% yoy in July, above expectation. Major banks mortgage approvals dropped slightly to 47k in July, inline with expectation. CBI trends total orders improved to -14 in August.
Euro recovers mildly after Bundesbank raised Germany growth forecast for this year from 1.9% to 3.0% after that strong Q2 GDP figure. Bundesbank said that fundamental economic situation in Germany is very favorable at the moment even though The growth tempo will normalize after the extraordinarily dynamic second quarter. Economic upswing is likely to continue in the second half of the year, with a continuation of moderate upward price developments.
Other data released today saw Swiss ZEW improved sharply from 2.2 to 9.1 in August. Trade surplus widened more than expected to record high of CHF 2.89B in July. German PPI rose 0.5% mom, 3.7% yoy in July. Japan all industry index rose 0.1% mom in June. New Zealand PPI rose more than expected in Q2. PPI input jumped 1.4% qoq while output jumped 1.1% qoq versus expectation of 0.6% qoq and 0.7% qoq respectively.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 85.20; (P) 85.44; (R1) 85.69; More.
USD/JPY dips again in early US session but is staying in tight range so far. Intraday bias remains neutral. Nevertheless, note that recent decline is still in favor to continue as long as USD/JPY stays in the falling channel (resistance at 86.74). Below 85.11 minor support will argue that such decline is resuming for 84.71 and break there will target 80 psychological level next. However, decisive break of the upper channel resistance will strongly suggest that USD/JPY has bottomed out and will bring rally to 88.11 resistance for confirmation.
In the bigger picture, whole down trend from 2007 high of 124.13 is still in progress, but there is no confirmation that it has resumed. Consolidation from 84.81 could still have another rising leg and above 88.11 will bring another rise towards 55 week EMA (now at 91.68). But upside should be limited below 94.97 resistance. On the downside, sustained trading below 84.81 will confirm long term down trend resumption for 79.75 (1995 low). In another case, we'll stay bearish as long as 94.97 resistance holds.