The dollar rises against the yen as sentiment picks up further
The foreign exchange markets seem to be entering a phase of consolidation for the moment. The yen is trading largely lower as European indices and US futures rebound further. The Canadian dollar is the strongest with WTI crude oil recovering 68 handfuls. The Aussie and the British pound follow as the next strongest of the day. But after all, there isn’t much of a change in the weekly picture as the dollar and yen are still the strongest while commodity currencies are the weakest.
Technically, the strong rebound in the USD / JPY is worth noting. The eyes are now on resistance 110.33. The breakout there will argue that the corrective drop from 111.65 ended at 109.05. A larger rise would then be seen to retest a high of 111.65. At the same time, gold is back under the handle 1800, with the eyes on the support 1791.45. The breakout will indicate the completion of the rebound from 1750.49 and bring a further test of that support. The two developments, if they occur together, could indicate a stronger rally in the dollar elsewhere.
In Europe, at the time of writing, the FTSE is up 1.52%. The DAX is up 0.85%. The ACC is up 1.37%. The German 10-year rate is down from -0.002 to -0.410. Earlier in Asia, the Nikkei rose 0.58%. Hong Kong’s HSI fell -0.13%. China Shanghai SSE rose 0.73%. Singapore Strait Times rose 0.25%.
Gold Comes Back Below 1800, But Still In The Range
Gold is dropping noticeably again today, and is back below the 1800 handful at the time of writing. Although the decline is still contained above the 1791.45 support. The focus will remain on this level of support. As long as the support at 1791.45, the rebound from 1750.49 is still supportive of the rally. The breakout of 1833.91 will target a 61.8% retracement from 1916.30 to 1750.49 to 1852.96.
However, the firm break of 1791.45 would likely resume the decline of 1916.30. A further breakout of 1750.49 will confirm this bearish case and target the support at 1676.65 again.
BoJ Masayoshi: Slow inflation and powerful easing needed
BoJ Deputy Governor Amamiya Masayoshi said in his speech that an upward trend in private consumption should “become evident” as the impact of COVID-19 gradually declines and employee incomes increase. ”The“ virtuous circle ”in the“ business sector ”will extend to the“ household sector ”and“ intensify the cycle throughout the economy. ”Nonetheless, the baseline scenario contains“ high uncertainties ” With risks “biased downwards” on the spread of variants. But activity could improve more than expected as the deployment of the vaccine accelerates.
Masayoshi also said that it will take “time” to reach the price stability target of 2% inflation. He added: “While the inflation rate has clearly increased lately in the United States and other countries, it has been slow in Japan.” In view of this, “there is a need for the Bank to persistently continue to conduct strong monetary easing in order to achieve the objective of price stability.”
Japanese exports grew 48.6% yoy in June, 4th month of double-digit growth
Exports from Japan increased 48.6% yoy to JPY 7220B in June. This is the fourth consecutive month of double-digit growth, although it is vastly exaggerated by last year’s pandemic plunge. By destination, exports to China jumped 27.7% year-on-year, driven by demand for chip manufacturing equipment, raw materials and plastics. Exports to the United States also increased 85.5% year-on-year, driven by cars, auto parts and engines. Imports increased 32.7% year-on-year to JPY 6837B. The trade surplus stood at JPY 383 billion.
In seasonally adjusted terms, exports increased 2.4% month on month to JPY 7040B. Imports increased 4.0% month-on-month to JPY 7130B. The trade balance turned into a deficit of JPY 0.09T, against the expectation of a surplus of JPY 0.02T.
Retail sales in Australia fell -1.8% month-on-month in June following the return of restrictions
According to a preliminary estimate, retail sales in Australia fell -1.8% or -515.1 million AUD in June 2021. Compared to June 2020, sales increased 2.9% year-on-year. Victoria (-3.5%) led the state’s falls in June, with the impact of the state’s fourth lockdown being more pronounced in June than in May (-0.9%). New South Wales (-2.0%) and Queensland (-1.5%) also fell due to stay-at-home restrictions and reduced interstate mobility.
Ben James, director of quarterly economic surveys, said: “The drop in revenue in June is due to the impact of coronavirus restrictions in several states. Victoria experienced restrictions from the start of the month, which were gradually eased from June 11. New South Wales, particularly Greater Sydney, saw stay-at-home orders issued towards the end of the month. Other states and territories have seen their trade halted due to mini-locks, as well as reduced mobility between states with tighter border restrictions. “
Australia Westpac leading index fell to 1.34, RBA to use flexibility in asset purchases
The Australia Westpac leading index slowed from 1.68% to 1.34% in June. The index peaked at 5% in November of last year, then gradually fell back. It is still comfortably above zero and signals above-trend growth prospects. Still, Westpac expected a contraction of -3.1% of GDP in the third quarter in New South Wales and -0.1% in Victoria due to the resumption of lockdowns.
Westpac added that RBA would be informed of significant downward revisions to third-quarter growth at the August 3 meeting. At least he could announce the postponement of tapering from AUD 5 billion to AUD 4 billion per week, which is expected to start in September. In addition, “a decision to immediately increase purchases to $ 6 billion per week would certainly send the right signal that the Bank is responsive to economic developments and is ready to use its new flexible policy tool accordingly.”
USD / JPY Midday Outlook
Daily Pivots: (S1) 109.47; (P) 109.72; (R1) 110.10; After…
The intraday bias of the USD / JPY remains neutral at this point. Further decline will remain in favor as long as 110.33 resistance is intact. On the downside, the breakout of 109.05 will target a 38.2% retracement from 102.58 to 111.65 to 108.18. However, on the upside, the breakout of 110.33 will support that the jerky drop to 111.65 is over and bring the bias upward to test this higher again.
Overall, the medium term outlook remains neutral with resistance at 111.71 intact. Sustained trading below the 55 day EMA would support the 101.18 configuration to start another lower leg, which could revert to the support at 102.58 and below. For now, the outlook will not turn bullish as long as 111.71 resistance is held, even with a strong rebound.
Update of economic indicators
|23:50||JPY||Trade balance (JPY) June||-0.09T||0.02T||0.04T||0.02T|
|0:30||EUR||Westpac Leading Index H / M June||-0.10%||-0.10%||0.10%|
|1:30||EUR||Retail sales M / M June P||-1.80%||-0.50%||0.40%|
|6:00||GBP||Public sector net borrowing (GBP) June||22.0B||21.5B||23.6B||19.9B|
|12:30 p.m.||GOUJAT||New Housing Price Index M / M June||0.60%||1.10%||1.40%|
|2:30 p.m.||USD||Crude Oil Inventories||-7.9 million|