Published: September 30, 2007 11:14 PM
It was another dog day for the dollar as it made new lows against several currency pairs. EUR/USD and GBP/USD briefly traded above Friday�s highs before settling back to their recent range. AUD/USD and NZD/USD were also strong, breaking through .8900 and .7600 respectively. USD/JPY was one of the few currencies which was not lower on the weak dollar as 114.70 is offering some solid support. JPY crosses also continued to be bought on dips especially with USD/JPY�s bid tone.
The main economic release for the session was the Japanese Tankan Report, a quarterly survey of business sentiment. The Large Manufacturing Index came in at 23 vs. expectations of 21 and Capital Expenditures came in at 8.7% vs. expectations of 7.5%. After an initial reaction of selling the JPY crosses, traders bought them back as USD/JPY traded back through 115.00 and EUR/JPY through 164.00. The push higher in these pairs makes one wonder whether an increase in Japanese interest rates would be enough to end the JPY carry trade. Stronger equity markets are also contributing as the Nikkei traded up 65 at midday.
Looking forward, it�s another pivotal week that ends with US employment data. In Asia we have Australian trade balance, retail sales, and the Reserve Bank of Australia set to announce interest rates. Also, China is out on holiday this week and could make the sometimes low liquidity Asia session even more so. With the dollar trending lower and the JPY crosses higher, will we see profit taking in front of these important economic releases or a continuation in these two powerful trends?
Upcoming Data Releases (London Session):
Switzerland: (3:30am ET) SVME Purchasing Managers� Index expected 63 vs. previous 65.1 (relevance: low).
Germany: (3:55am ET) PMI Manufacturing expected 55 vs. previous 56 (relevance: medium).
EC: (4am ET) PMI Manufacturing expected 53.2 vs. previous 53.2 (relevance: medium).
UK: (4:30am ET) PMI Manufacturing expected 55.6 vs. previous 56.3 (relevance: medium).