Daily Report: Yen Steady as BoJ on Hold

The Japanese yen is basically steady after BoJ left monetary policies unchanged as widely expected. Interest rate was held near zero and the annual target of monetary base expansion was kept at JPY 60-70T. The central bank lowered the growth forecast for the current fiscal year to next March slightly to 1.0%, down from prior forecast of 1.12%. The growth projections for 2015 and 2016 fiscal year were held unchanged at 1.5% and 1.3% respectively. Price forecasts were also left unchanged. Core CPI, after tax adjustment, was projected to be 1.3% in the current fiscal year. BoJ saw inflation to be at 1.9% in fiscal 2015-16 and 2.1% in fiscal 2016-17. BoJ noted in the statement that the economy is “likely to continue recovering moderately as a trend”.

In the meeting minutes released today, RBA noted that “low interest rates were working to support demand.” However, the minutes also noted that members thought it’s difficult to judge how that would offset the “anticipated substantial decline in mining investment and the effect of planned fiscal consolidation.” Also, “household consumption growth appeared to have eased” and “forward-looking indicators had been mixed of late and consistent with only moderate growth in employment.” Nonetheless, “forward-looking indicators suggested that further strong growth in residential construction was in prospect, despite some easing of conditions in the established housing market over recent months”.

ECB president Draghi told the newly formed European parliament yesterday that quantitative easing “falls squarely” in the central bank’s mandate. Meanwhile, “the appreciation that took place since mid-2012 had an impact on price stability,” and the exchange rate of Euro “remains an important driver of future inflation in the euro area.” Earlier, IMF urged ECB to consider a large-scale asset-purchase as that “can push up inflation by raising consumption and investment across the euro area, and support that trend by reviving the supply and demand for bank credit.”

Looking ahead, the economic calendar is busy today. Swiss will release PPI, UK will release CPI and PPI while Germany will release ZEW in European session. US will release retail sales, Empire state manufacturing and import price index.

Daily Pivots: (S1) 137.91; (P) 138.18; (R1) 138.53; More…

Intraday bias in EUR/JPY remains neutral for the moment but with 138.75 minor resistance intact, deeper decline is still expected. As noted before, the cross in in the third leg of the pattern from 145.68. Below 137.49 will target 136.22 support next. On the upside, above 138.75 will turn focus back to 139.27 resistance and break will indicates near term reversal.

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

JPY
BoJ Monetary Policy Statement

23:01
GBP
BRC Sales Monitor Y/Y Jun
-0.80%

0.50%

1:30
AUD
RBA Minutes

7:15
CHF
Producer Import Prices M/M Jun

0.10%
0.10%

7:15
CHF
Producer Import Prices Y/Y Jun

-0.80%
-0.80%

8:30
GBP
CPI M/M Jun

-0.10%
-0.10%

8:30
GBP
CPI Y/Y Jun

1.60%
1.50%

8:30
GBP
Core CPI Y/Y Jun

1.70%
1.60%

8:30
GBP
RPI M/M Jun

-0.10%
0.10%

8:30
GBP
RPI Y/Y Jun

2.40%
2.40%

8:30
GBP
PPI Input M/M Jun

0.00%
-0.90%

8:30
GBP
PPI Input Y/Y Jun

-4.50%
-5.00%

8:30
GBP
PPI Output M/M Jun

0.10%
-0.10%

8:30
GBP
PPI Output Y/Y Jun

0.50%

8:30
GBP
PPI Output Core M/M Jun

0.00%
0.00%

8:30
GBP
PPI Output Core Y/Y Jun

1.00%
1.00%

8:30
GBP
DCLG UK House Prices Y/Y May

10.20%
9.90%

9:00
EUR
German ZEW (Economic Sentiment) Jul

30
29.8

9:00
EUR
German ZEW (Current Situation) Jul

67.5
67.7

9:00
EUR
Eurozone ZEW (Economic Sentiment) Jul

62.3
58.4

12:30
USD
Advance Retail Sales Jun

0.60%
0.30%

12:30
USD
Retail Sales Less Autos Jun

0.60%
0.10%

12:30
USD
Empire State Manufacturing Jul

17.2
19.3

12:30
USD
Import Price Index M/M Jun

0.30%
0.10%

14:00
USD
Business Inventories May

0.60%
0.60%

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