Mid-Day Report: Dollar Firm against Commodity Currencies and Yen

Dollar remains firm against commodity currencies and yen in early US session but continues to consolidate against European majors. Initial jobless claims rose more than expected to 315k in the week ended September 6. That compared to consensus of 306k and prior week’s 304k. Continuing claims rose 9k to 2.49m in the week ended August 30. Economists are not concerned with the rise in claims as the current level of around 300k is seen as tight. Released from Canada, new housing price index was flat in July.

BoE governor Carney said if an independent Scotland wants to continue to use Sterling, it’s reserves need to be “sufficient for the lender of last resort” as well as “back the credibility of the notes in circulation.” And, he emphasized that it’s the “size of the reserves” that is “one of the most important factors that determines the credibility”. And, for a new country, it’s also essential to “run a balance of payment surplus”. Meanwhile, Carney also noted that BOE has contingency plan in case Scotland goes independent after the referendum and BoE will remain in charge of financial stability during the transition. Released from UK, RICS house price balance dropped to 40 in August.

ECB governing council member Visco warned that “averting the risk that a too-prolonged period of low inflation would eventually lead to a dis-anchoring of medium-term inflation expectations is paramount.” And, “declining inflation reflects not only the fall in energy prices, compounded by the past appreciation of the euro, but also the persistent weakness of the economy.” Visco also said there is “no constraint” for monetary policy to provide stimulus and “if needed, further monetary-policy actions can be undertaken.” Released from Eurozone, German CPI was finalized at 0.0% mom, 0.8% yoy in August.

RBNZ kept the OCR unchanged at 3.50% as widely expected. Governor Graeme Wheeler indicated that ‘it is prudent to undertake a period of monitoring and assessment before considering further policy adjustment’. The RBNZ appeared deliberatively vague in communicate the timing of the next rate hike, noting that it expects ‘some further policy tightening will be necessary to keep future average inflation near the 2% target mid-point and ensure that the economic expansion can be sustained’. Overall, the policy statement appears more dovish than expected on reduced inflationary pressure. More in RBNZ Paused In Rate Hike, Probably Until Next Year.

Australia reported an unrealistic 121k growth in the job market in August. Economists noted that the unprecedented numbers were largely due to change in sampling and composition of the survey. The ABS started adjusting the definitions and changing samples in July 2014 and will continue through May 2015. Thus, there are possibilities of strange numbers in the upcoming releases. And looking through the noises, around 18.2k jobs were created only. Nonetheless, that’s still better than expectation of 15k. Unemployment rate dropped back to 6.1%, down from July’s 6.4% and same sa June’s 6.1%.

BoJ governor Kuroda met with prime minister Abe today. Kuroda said that “if the BOJ’s price target became difficult to achieve, we are prepared to adjust policy and won’t hesitate, whether this is additional easing or something else.” But he also explained that “virtuous cycle is continuing in the economy and we are on the path to meet the price stability target.”

Elsewhere, Japan BSI large industry index rose to 12.7 Q/Q in Q3. China CPI slowed more than expected to 2.0% yoy in August while PPI dropped -1.2% yoy.

Daily Pivots: (S1) 106.30; (P) 106.59; (R1) 107.15; More…

USD/JPY’s rally continues today and reaches as high as 107.15 so far. Intraday bias remains on the upside and current rally from 101.08 should target 100% projection of 96.56 to 105.43 from 101.08 at 109.95 next. On the downside, below 106.03 minor support will turn bias neutral and bring consolidations. But downside should be contained well above 104.27 support and bring another rally.

In the bigger picture, whole medium term up trend from 75.56 is still in progress. We’re not too convinced with the medium term momentum yet and will be cautious on topping above 50% retracement of 147.68 to 75.56 at 111.62. Nonetheless, break of 101.08 is needed to signal medium term reversal, or outlook will stay bullish. Current rally could extend to 61.8% retracement at 120.13 on upside acceleration.

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
21:00
NZD
RBNZ Rate Decision
3.50%
3.50%
3.50%

23:01
GBP
RICS House Price Balance Aug
40%
47%
49%

23:50
JPY
BSI Large All Industry Q/Q Q3
12.7
-10.3
-14.6

01:30
CNY
PPI Y/Y Aug
-1.20%
-1.10%
-0.90%

01:30
CNY
CPI Y/Y Aug
2.00%
2.20%
2.30%

01:30
AUD
Employment Change Aug
121.0K
15.0K
-0.3K
-4.1K
01:30
AUD
Unemployment Rate Aug
6.10%
6.30%
6.40%

06:00
EUR
German CPI M/M Aug F
0.00%
0.00%
0.00%

06:00
EUR
German CPI Y/Y Aug F
0.80%
0.80%
0.80%

08:00
EUR
ECB Monthly Bulletin

12:30
CAD
New Housing Price Index M/M Jul
0.00%
0.20%
0.20%

12:30
USD
Initial Jobless Claims (SEP 6)
315K
306K
302K
304K
14:30
USD
Natural Gas Storage

79B

18:00
USD
Monthly Budget Statement Aug

-132.8B
-94.6B

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