JPY climbs on talk of BoJ rate hike, DXY dips

Fed, BoE rate decisions, US payrolls eyed

Summary:

The US Dollar eased across the board as traders braced for 3 central bank meetings. The BOJ kicks off its policy meeting later today with Japan’s public broadcaster NHK reporting the likelihood of a rate increase to 0.25%. Market forecasts are for an unchanged rate of 0.1%.

Japan’s Yen climbed against the Greenback with the USD/JPY pair tumbling to 152.90 from 154.00 yesterday. Against the other major currencies, the Yen strengthened. The EUR/JPY pair slumped to 165.35 from 166.70.

The Dollar Index (USD/DXY), a popular measure of the Greenback’s value against a basket of six major currencies, eased to 104.50 from 104.60. Overnight, the DXY traded to a high of 104.80.

The Euro (EUR/USD) dipped to 1.0810 from 1.0820 while Sterling (GBP/USD) was last at 1.2835 (1.2860). Eurozone GDP expanded 0.3% in Q2, matching forecasts.

The Aussie Dollar (AUD/USD) finished modestly lower to 0.6535 from 0.6550 yesterday. Australia’s June Building Permits slumped to -6.5%, against forecasts at -2.0%. The Kiwi (NZD/USD) was little changed, settling at 0.5880 (0.5885).

Against the Asian and Emerging Market Currencies, the US Dollar was mostly lower. The USD/SGD pair (Dollar-Singapore Dollar) edged lower to 1.3425 from 1.3433. USD/CNH (Dollar-Offshore Chinese Yuan) settled at 7.2450, down from 7.2650 yesterday.

The US Federal Reserve meets on policy tomorrow with the Bank of England scheduled for Friday. The Fed is widely expected to hold interest rates steady with a rate cut in September.

Global bond yields eased. The US 10-year bond yield closed at 4.14% (4.17%). Japan’s 10-year JGB yield dipped to 0.99% from 1.01%. Germany’s 10-year Bund rate closed at 2.34% (2.35%).

Other economic data released yesterday saw French GDP (Q/Q) climb to 0.3% from 0.2%, beating forecasts at 0.2%. Eurozone Q2 GDP matched expectations at 0.3%. The US Conference Board’s Consumer Confidence Index beat forecasts, up to 100.3, from 99.9.

US JOLTS Job Openings in June rose to 8.18 million, from 8.14 million previously, beating estimates at 8.05 million.

• USD/JPY – In another volatile session, the Greenback traded to an overnight high at 155.22 before tumbling at the New York close. The USD/JPY pair saw an overnight low of 152.88 before recovering.
• EUR/USD – The shared currency finished modestly lower against the Greenback at 1.0810 from 1.0820 yesterday. The Euro traded to an overnight high of 1.0836 while the overnight low recorded was 1.0798.
• AUD/USD – The Aussie Battler eased to 0.6535 from 0.6550 yesterday. Broad-based US Dollar strength weighed on the antipodean. The Australian Dollar traded to an overnight high at 0.6562. The overnight low recorded for the AUD/USD pair was at 0.6529.
• GBP/USD – The British Pound dipped against the US Dollar to 1.2835 in late New York, from 1.2860 yesterday. Sterling slumped to an overnight low at 1.2820 before recovering. The overnight high recorded for the GBP/USD pair was at 1.2864.

On the lookout:

Today’s economic data calendar picks up with New Zealand’s June Building Permits (m/m f/c 1.2% from -1.7% - ACY Finlogix). Japan follows next with its Preliminary June Industrial Production (m/m f/c -4.8% from 3.6%; y/y f/c 1.3% from 1.1% - ACY Finlogix), Japanese June Retail Sales (m/m f/c 0.4% from 1.7%; y/y 3% from 3.3% - ACY Finlogix).

New Zealand follows with its July ANZ Bank Business Confidence (f/c 4.5 from 6.1 – ACY Finlogix). Australia follows with its June Retail Sales (m/m f/c 0.1% from 0.6% - ACY Finlogix), Australian June Monthly CPI Indicator (f/c 3.8% from 4.0% - ACY Finlogix), Australian RBA Trimmed Mean CPI (q/q f/c 0.9% from 1%; y/y f/c 4.0% from 4.0% - ACY Finlogix), and Australian June Housing Credit (m/m f/c 0.4% from 0.4% - ACY Finlogix). China follows next with its NBS July Manufacturing PMI (f/c 49.3 from 49.5 – ACY Finlogix), Chinese NBS July Non-Manufacturing PMI (f/c 50.2 from 50.5 – ACY Finlogix).

The Bank of Japan Interest Rate Decision follows (f/c 0.1% from 0.1% - ACY Finlogix). Japan also releases its July Consumer Confidence (f/c 36.5 from 36.4 – ACY Finlogix), June Housing Starts (y/y f/c -2% from -5.3% - ACY Finlogix). Germany kicks off Europe with its June Retail Sales (m/m 0.7% previous was -1.2%; y/y 3% previous was -0.6% - ACY Finlogix).

France follows with its Preliminary July Inflation Rate (m/m f/c 0.3% from 0.1%; y/y f/c 2.5% from 2.2% - ACY Finlogix). Germany releases its July Unemployment Rate (f/c 6.0% from 6.0% - ACY Finlogix). The Eurozone follows with its Flash July Inflation Rate (m/m f/c -0.3% from 0.2%; y/y f/c 2.4% from 2.5% - ACY Finlogix), Eurozone July Core Inflation Rate (y/y f/c 2.8% from 2.9% - ACY Finlogix). Italy releases its July Preliminary Inflation Rate (f/c y/y f/c 0.9% from 0.8% - ACY Finlogix).

Canada kicks off North America with its June Preliminary GDP (m/m f/c 0.1% from 0.3% - FX Street). The US rounds up today’s busy economic calendar with its Chicago July PMI (f/c 44.5 from 47.4 – ACY Finlogix), US Employment Cost Index (q/q f/c 1% from 1.2% - ACY Finlogix).

Trading perspective:

Expect volatility to pick up as markets approach upcoming central bank meetings. All eyes on the Bank of Japan kicks today with public broadcaster NHK reporting a likely rate increase from the BOJ to 0.25% from 0.1% currently. A BOJ rate increase to 0.25% could see the USD/JPY rate drop like a stone to the 150.00 support level before steadying. If the BOJ keeps rates unchanged it would be negative for the Japanese currency and the USD/JPY pair would ratchet higher. If the BOJ reduce their bond purchases, it will amount to Quantitative Tightening which would see USD/JPY tumble. Japan’s central bank also releases its intervention data for the month. Markets are also looking to the US Federal Reserve which has its policy meeting later today.

• USD/JPY – Expect more choppy trade ahead with immediate support found at 152.40 followed by 152.10 and 151.80. Immediate resistance lies at 153.20, 153.70 and 154.20. Look for the USD/JPY pair to trade in a likely range today between 152.30 and 153.30 first up. A BOJ rate hike could see USD/JPY test 152.00.

• AUD/USD – The Australian Dollar eased against the Greenback to 0.6535 (0.6565). Immediate support today lies at 0.6500 followed by 0.6470. On the topside, immediate resistance can be found at 0.6570 (overnight high traded was 0.6562) and 0.6600. Look for the Aussie to consolidate in a likely range today of 0.6470-0.6570. Trade the range.
• EUR/USD – the Euro dipped against the US Dollar to 1.0810 from 1.0820 yesterday. Look for immediate support at 1.0780 and 1.0750. Immediate resistance can be found at 1.0840 (overnight high traded was 1.0836). The next resistance level lies at 1.0870 and 1.0900. Look for the Euro to consolidate in a likely range today of 1.0780-1.0870 today. Trade the range, with the preference to sell Euro rallies.
• GBP/USD – Sterling dipped against the Greenback to 1.2835 from 1.2860. Look for immediate support at 1.2800 followed by 1.2770 and 1.2740. Immediate resistance can be found at 1.2870 (overnight high traded was 1.2864). The next resistance level lies at 1.2900. Look for the British Pound to trade a likely range today of 1.2810-1.2870. Trade the range.

Happy Wednesday and trading all.