Quick update: Dollar reverses earlier gains and fell sharply after release of crude oil inventory which sends oil price sharply higher. Most major currencies are higher against dollar and yen. But after all not that yen crosses are generally still feeling heavy.

The Japanese yen is sharply higher in early US session following another round of sharp fall in treasury yield as traders seek safe investments following overnight weakness in Asian and European stock markets. In particular, China stocks closed -4.3% lower at new low below 2900 level. Also, note that USD/JPY has taken out an important fibonacci support at 94 level which argues that the sharp rally earlier this month was merely a false break and the whole down trend form 101.43 is still in force and the yen will likely continue to out-perform dollar in near term.

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Sterling was hit hard in European session after the release of BoE meeting minutes. The MPC minutes for the August meeting revealed that while all 9 members voted for expanding the bong purchase program, three of them, Governor Mervyn King, Timothy Besley and David Miles, preferred a 75B-pound expansion to a total of 200B pound while others favored 50B pound to 175B pound. the argument behind is that 'the potential adverse consequences of adding another large monetary stimulus might be less severe than the possible costs of acting too cautiously while insufficiently stimulatory monetary policy would cause inflation to remain below the target for a sustained period of time, depressing inflation expectations, and might harm public confidence in the recovery causing it to falter. Sterling gave up much of yesterday's CPI triggered rebound against dollar and yen, as well as Euro. More in Review on BOE Minutes - King Wanted More Expansion On Bond-Buying

Other data released from Europe saw German PPI dropped at steepest rate since 1949, by -1.5% mom in July, sending yoy rate down to -7.8%. Eurozone current account deficit came in much wider than expected at EUR -5.3b. Meanwhile, UK CBI industrial trends total orders also improved less than expected to -54 in August. Canadian dollar had little reactions to lower than expected CPI readings. Heading CPI dropped -0.3% mom, -0.9% yoy in July, below expectation of -0.2% mom, -0.8% yoy. Core CPI was flat mom in July with yoy rate down to 1.8%. Canadian leading indicators rose more than expected by 0.4% mom in July.

USD/JPY Mid-Day Outlook

USD/JPY's decline extends further in early US session and reaches as low as 93.74 so far. Break of 61.8% retracement of 91.73 to 97.77 at 94.03 suggests that whole rebound from 91.73 has indeed completed at 97.77 already. Short term outlook is turned bearish and deeper decline could now be seen to retest 91.73 low first. On the upside, break of 95.28 resistance will mix up the outlook again.

In the bigger picture, the break of mentioned 94.03 fibo support suggests that rebound from 91.73 has completed already. Also, it indicates that prior break of falling channel resistance was a false break. The failure below 98.87 resistance also keeps the lower high pattern since 101.43 and thus argue that such down trend is possibly still in progress. A break of 91.73 will confirm this case and bring deeper fall towards 87.12 key low. On the upside, break of 97.77 resistance, though, will revive the case that USD/JPY has bottomed out at 91.73 and will turn outlook bullish again.

USD/JPY

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
22:45NZDPPI - Inputs Q/Q Q20.00%-0.70%-2.50% 
22:45NZDPPI - Outputs Q/Q Q2-0.70%-0.60%-1.40% 
04:30JPYAll Industry Activity Index M/M Jun0.10%0.40%0.70% 
06:00EURGerman PPI M/M Jul-1.50%-0.20%-0.10% 
06:00EURGerman PPI Y/Y Jul-7.80%-6.50%-4.60% 
08:00EUREurozone Current Account (EUR) Jun-5.3B-1.7B-1.2B 
08:30GBPBoE MPC Minutes0--0--90--0--90--0--9 
10:00GBPU.K. CBI Industrial Trends Total Orders Aug-54-50-59 
11:00CADCPI M/M Jul-0.30%-0.20%0.30% 
11:00CADCPI Y/Y Jul-0.90%-0.80%-0.30% 
11:00CADBoC CPI Core M/M Jul0%0.10%0.00% 
11:00CADBoC CPI Core Y/Y Jul1.80%1.90%1.90% 
12:30CADLeading Indicators M/M Jul0.40%0.20%-0.10% 
14:30USDCrude Oil Inventories 1.1M2.5M