The dollar is trading broadly higher in the Asian session today, helped by the continued rally in US Treasury yields. For the same reason, the yen is falling across the board this week and the decline is extending. The net result is that USD/JPY hit a new 24-year high and still looks unstoppable. The Canadian dollar is trading on a mixed tone for now, but hopefully today’s BoC interest rate decision will give the loonie a clear direction to follow.
Technically, EUR/USD’s downside momentum is far from convincing for now, despite a break of 0.9899 support earlier in the week. Euro bears would likely have to wait for ECB risk to clear before jumping in. There are prospects for a downside acceleration in EUR/USD if the 61.8% forecast from 1.0773 to 0.9951 is decisively removed from 1.0368 at 0.9860. The next target at 100% projection at 0.9546 could be reached quickly if that happens.
In Asia, the Nikkei is down -0.81% at the time of writing. The Hong Kong HSI is down -1.80%. China Shanghai SSE is down -0.05%. The Singapore Strait Times is down -0.30%. The 10-year Japanese JGB yield rose 0.0048 to 0.246. Overnight, the DOW fell -0.55%. The S&P 500 fell -0.41%. NASDAQ fell -0.74%. The 10-year yield rose 0.147 to 3.340.
Japanese officials, concerned about the yen’s lopsided movement, warned of the need for action
As the yen continues to fall to a fresh 24-year low against the dollar, Japanese Finance Minister Shunichi Suzuki warned that “recent moves are fairly rapid and one-sided. We have to watch the developments with great interest.”
Chief Cabinet Secretary Hirokazu Matsuno said at a news conference, “I’m concerned about the rapid, one-way moves in the FX market lately. If such steps continue, we will take the necessary measures.”
Australia’s GDP grew 0.9% qoq in the second quarter, driven by household spending and exports
Australia’s GDP grew 0.9% qoq in the second quarter, in line with expectations. Household spending increased by 2.2% in the quarter and contributed 1.1 percentage points to GDP. Net trade contributed 1.0 pp to GDP, driven by exports, which rose 5.5%, partially offset by a 0.7% increase in imports. Trade conditions rose 4.6%, with export and import prices rising sharply.
Sean Crick, Head of National Accounts at ABS, said: “Increases in household spending and exports drove growth in the June quarter. This is the third consecutive quarter of economic growth following a slowdown in the September quarter of 2021, which was impacted by the delta breakout.”
Australia AiG services rose to 53.3, companies highlight rate of concern
The Australia AiG Performance of Services Index rose 1.6 points to 53.3 in August. Looking at some details, sales increased by 2.6 to 51.9. Employment rose 0.8 to 53.2. Order intake increased by 6.7 to 57.3. Input prices fell -5.6 to 68.7. Selling prices decreased by -2.2 to 61.2. The average wage fell by -1.3 to 67.6.
Innes Willox, Chief Executive of Ai Group, said: “Services remained on an expansionary trajectory in August, indicating the overall resilience of the sector, with sales, employment and new orders all higher than July…. Pressure on prices and wages continued into August, although the pace of purchase price increases eased somewhat. With service firms emphasizing interest rates as a key concern, the Reserve Bank’s decision yesterday to raise interest rates by a further 50 basis points to 2.35% will further fuel fears of a slowdown in spending in the coming months.”
BoC to rise, AUDCAD poised for downtrend resume
The BoC interest rate decision is the focus today. Markets expect a rate hike of 75 basis points to 3.25%. But that’s far from certain. With the current rate of 2.50% already in neutral territory, there are talks that the BoC could opt for a smaller 50 basis point hike. However, there are also arguments for a larger 100 basis point hike today followed by a pause. There is some wild card potential.
Some previews of BoC:
AUDCAD is making some progress breaking 0.8875 minor support this week. The development suggests that the corrective recovery from 0.8733 is complete at 0.9104 and a larger downtrend is poised to resume. A retest of the 0.8733 low should be seen first. A decisive break there will confirm this bearish view and target a 61.8% exp 0.9514 – 0.8733 from 0.9104 at 0.8621. However, break of 0.8949 minor resistance in reaction to BoC will confuse the outlook.
Germany’s industrial production, Switzerland’s foreign exchange reserves, Italy’s retail sales and the euro-zone GDP revision are all due to be released in the European session. Later in the day, the US and Canada are due to release trade balances.
Daily USD/JPY Outlook
Daily Pivots: (S1) 141.01; (P) 142.04; (R1) 143.83; More…
USD/JPY accelerates as high as 144.37 today as uptrend continues. The 100% forecast from 126.35 to 139.37 from 130.38 to 143.40 has already been met, but there is no sign of it being exceeded yet. Intraday bias remains on the upside for next long term resistance at 147.68. On the downside, a break of 140.24 minor support is needed to indicate a short-term topping. Otherwise, the outlook remains bullish in the event of a pullback.
Overall uptrend from 101.18 is still ongoing as part of overall uptrend from 75.56 (2011 low). Expect further rise to 147.68 (1998 high). For now, a break of 130.38 support is needed to be the first hint of a medium-term breach. Otherwise, even in the event of a deep pullback, the outlook remains bullish.
Update of economic indicators
|Greenwich Mean Time||Ccy||events||Indeed||forecast||previous||Revised|
|10:30 p.m||EUR||AiG Performance of Services Index 08||53.3||51.7|
|01:30||EUR||GDP Q/Q Q2||0.90%||0.90%||0.80%|
|02:00||CNY||Trade Balance (USD) August 8th||79.4B||91.8B||101.3B|
|02:00||CNY||Exports (USD) y/y Jul||7.10%||18.00%|
|02:00||CNY||Imports (USD) Y/Y Aug||0.30%||2.30%|
|02:00||CNY||Trade Balance (CNY) 8 Aug||536B||650B||683B|
|02:00||CNY||Exports (CNY) Y/Y Aug||11.80%||23.90%|
|02:00||CNY||Imports (CNY) Y/Y Aug||4.60%||7.40%|
|05:00||JPY||Leading economic index July P||99.60%||100.7||100.9|
|06:00||EUR||Germany Industrial Production M/M 07.07||-0.50%||0.40%|
|07:00||CHF||Foreign currency reserves (CHF) Aug||849B|
|08:00||EUR||Italy Retail M/M Jul||0.20%||-1.10%|
|09:00||EUR||Eurozone GDP Q/Q Q2||0.60%||0.60%|
|09:00||EUR||Employment development in the euro area Q/Q Q2 F||0.30%||0.30%|
|12:30 p.m||USD||Trade Balance (USD) 07.07||-70.2B||-79.6B|
|12:30 p.m||CAD||International trade in goods 07||$5.05 billion|
|14:00||CAD||BoC rate decision||3.25%||2.50%|
|14:00||CAD||Ivey PMI August||48.3||49.6|
|18:00||USD||The beige book of the Fed|