Daily Report: Yen Retreats after Risk Aversion Rally

Yen surged overnight on risk aversion as markets were concerned with geopolitical tensions in Ukraine and the Gaza. The news that a Malaysian airline plane was shot down over eastern Ukraine sent DOW down -161.39 pts, or -0.94% to close at 16976.81, back below 17000 handle. Asian equities followed and opened lower today but the yen pared back some of the gains. Dollar stayed firm against European majors as commodity currencies. In other markets, Gold rebounded strongly from below 1300 and breached 1320, now trading at 1313. Crude oil also jumped from around 99 level and is now challenging 104.

In US, St. Louis Fed Bullard said that the “normalization process” may need to start “sooner rather than later” if macroeconomic conditions continue to improve at the current pace. He is expecting a “bounce-back” in Q2 and the economy is on track for 3% growth or better in the second half of the year. Dallas Fed Fisher said earlier this week that he’s “more confident” then other FOMC members that the economy is improving. And Fed would likely raise interest rate in early 2015.

Canadian inflation data will be the main focus of today. Headline CPI is expected to rise to 2.4% yoy in June while core CPI is expected to be unchanged at 1.7% yoy. Canada will also release wholesale sales. US will release U of Michigan sentiment and leading indicators. Earlier, Eurozone will release current account in European session.

Daily Pivots: (S1) 136.59; (P) 137.06; (R1) 137.32; More…

EUR/JPY drops to as low as 136.71 so far and intraday bias remains on the downside. The cross is in the third leg of the pattern from 145.68 and should target 136.22 support. On the upside, above 137.49 minor resistance will turn bias neutral and bring consolidations before staging another decline.

In the bigger picture, loss of upside momentum was seen in bearish divergence condition in weekly MACD. However, EUR/JPY is so far holding above 135.50 key support. Thus, there is no confirmation of trend reversal yet. Break of 145.68 will extend the up trend from 94.11 towards 76.4% retracement of 169.96 to 94.11 at 152.59 before topping. Meanwhile, break of 135.50 will confirm reversal and target 124.95 support.

EUR/JPY 4 Hours Chart

EUR/JPY Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
08:00
EUR
Eurozone Current Account (EUR) May

24.3B
21.5B

12:30
CAD
Wholesale Sales M/M May

0.70%
1.20%

12:30
CAD
CPI M/M Jun

0.10%
0.50%

12:30
CAD
CPI Y/Y Jun

2.40%
2.30%

12:30
CAD
BoC CPI Core M/M Jun

-0.10%
0.50%

12:30
CAD
BoC CPI Core Y/Y Jun

1.70%
1.70%

13:55
USD
U. of Michigan Confidence Jul P

83
82.5

14:00
USD
Leading Indicators Jun

0.50%
0.50%

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