Daily Report: Yen Soft as CPI Slowed, German Ifo & UK GDP Watched

Japan Yen remains soft against other major currencies after release of inflation data today. The national CPI core slowed to 3.3% yoy in June as expected, down from May’s 3.4% yoy. After adjustment for the April tax hike, CPI ore slowed to 1.3% yoy, down from prior month’s 1.4% yoy. That’s the second month of slow down from April’s 1.5% yoy. BoJ governor Kuroda has repeatedly insisted that inflation was still on track to reach the 2% target and the setback was temporary. However, there were expectations that BoJ could be forced to ease policy further if inflation drop below 1% mark. Tokyo CPI core was unchanged at 2.8% yoy in July versus expectation of 2.7% yoy. Also released from Japan corporate services price index rose 3.6% yoy in June as expected.

Release from Germany, Gfk consumer sentiment rose slightly to 9 in August, breaking expectation of being unchanged at 8.9. German Ifo business claims will be a focus in European session today and is expected to show slightly deterioration. Eurozone will also release M3 money supply. Meanwhile, UK will release Q2 GDP advance reading and is expected to show 0.8% qoq growth. Index of services is expected to rise 1.0% 3mo3m in May. EUR/GBP breached 0.7933 minor resistance with yesterday’s recovery and that’s a early sign of trend reversal on loss of downside moment. We’ll keep on eye on the reaction of the cross to today’s data release.

From US, durable goods orders are expected to show 0.4% growth in June while ex-transport orders are expected to rise 0.6%. EUR/USD is still struggling to move away from 1.3476 support level despite breaking it this week. We’ll also pay close attention to today’s events and the impact on EUR/USD, which could set up further bullish run in the greenback.

Daily Pivots: (S1) 101.53; (P) 101.69; (R1) 101.97; More…

The break of 101.79 resistance suggests that the choppy decline from 102.79 has completed at 101.06 already. Intraday bias is cautiously on the upside for 102.26 resistance. Break there confirm this case and target 102.79 resistance and above. Overall, pair is still bounded in the sideway pattern from 100.75 and we’d expect more sideway trading ahead. On the downside, below 101.41 minor support will turn bias back to the downside.

In the bigger picture, at this point, there is no confirmation of medium term reversal yet even though bearish divergence condition was clear in weekly MACD. Attention remains on 100.61 key support level and decisive break there will confirm the bearish case. In that case, deeper decline should be seen back to 38.2% retracement o 75.56 to 105.41 at 94.00. In case of another rise, we’ll focus on reversal as it approaches 50% retracement of 147.68 to 75.56 at 111.62.

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
23:30
JPY
National CPI Core Y/Y Jun
3.30%
3.30%
3.40%

23:30
JPY
Tokyo CPI Core Y/Y Jul
2.80%
2.70%
2.80%

23:50
JPY
Corporate Service Price Y/Y Jun
3.60%
3.60%
3.60%

6:00
EUR
German GfK Consumer Sentiment Aug
9
8.9
8.9

8:00
EUR
German IFO – Business Climate Jul

109.5
109.7

8:00
EUR
German IFO – Current Assessment Jul

114.5
114.8

8:00
EUR
German IFO – Expectations Jul

104.5
104.8

8:00
EUR
Eurozone M3 Y/Y Jun

1.10%
1.00%

8:30
GBP
GDP Q/Q Q2 A

0.80%
0.80%

8:30
GBP
Index of Services 3M/3M May

1.00%
0.90%

12:30
USD
Durable Goods Orders Jun

0.40%
-1.00%

12:30
USD
Durables Ex Transportation Jun

0.60%
-0.10%

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