The Dollar climbed to a 4 � -year high against the Yen on Thursday for a second day ahead of a Bank of Japan policy meeting and a report on US Consumer Inflation that could whether US Treasury bond yields extend a six-week climb. Globally bond yields have been rising on expectations that economic growth will be sustained and central bank around the world will continue to raise interest rates to contain inflation.
Traders await US Consumer Price data later today to see if Treasury yields rise further, as well as comments by Bank of Japan Governor Toshihiko Fukui after a policy meeting at which the Central Bank held rates at 0.5% as widely expected.
News and Events:
The Dollar climbed to a 4 � -year high against the Yen on Thursday for a second day ahead of a Bank of Japan policy meeting and a report on US Consumer Inflation that could whether US Treasury bond yields extend a six-week climb. Since April, the benchmark 10-year US Treasury note yield has risen around 60bp as dealers priced out any chance of a Federal Reserve Interest rate cut in 2007, helping the dollar advance from record lows against the Euro. Globally bond yields have been rising on expectations that economic growth will be sustained and central bank around the world will continue to raise interest rates to contain inflation.
A report released on Thursday showed that the US core Producer Price Index was up 1.6% in May compared with 1.5% in April, leaving open the possibility that Friday’s Consumer inflation data could reflect upward pressures. (Core prices exclude food and energy costs).
Traders await US Consumer Price data later today to see if Treasury yields rise further, as well as comments by Bank of Japan Governor Toshihiko Fukui after a policy meeting at which the Central Bank held rates at 0.5% as widely expected.
UsdJpy jumped above the psychologically important 122.22 level this week as investors abandoned the possibility of a Federal Reserve rate cut this year. UsdJpy climbed 0.38% to 123.13 high yesterday. Yen stays under pressure as trades noted that Japanese investment trusts were selling the Yen against other currencies as they hunt for higher yields on behalf of individual investors putting their summer bonuses to work. UsdChf rose for the sixth consecutive session up 0.17% to 1.2466 as this low-yielding currency received no support from a widely expected Swiss National Bank rate increase of 0.25% to 2.5% (3months Libor).
Today’s Key Issues (time in GMT):
09.00 EUR 1Q Euro-zone Labor Costs 2.5% vs 2.4% (YoY)
09.00 EUR April Euro-zone Trade Balance �1.2B vs �7.4B
10.00 EUR ECB’s Papademos presents financial stability report
12.30 US Fed’s Bernanke to speak at Credit Conference in Atlanta
12.30 US May Consumer Price Index 0.6% vs 0.4% (MoM)
12.30 US May Consumer Price Index 2.6% vs 2.6% (YoY)
12.30 US May CPI ex-food & energy 0.2% vs 0.2% (MoM)
12.30 US May CPI ex-food & energy 2.3% vs 2.3% (YoY)
12.30 US May Empire Manufacturing 10.8 vs 8.03
12.30 US June Current Account Balance -$201B to -$203B vs -$195.7B
13.15 US April Industrial Production 0.2% vs 0.7%
13.15 US May Capacity utilization 81.6% vs 81.6%
14:00 US May University of Michigan Confidence 88 vs 88.3
16.20 US Fed’s Yellen speaks at Free Trade Conf in Massachusetts
The Risk Today:
EurUsd found support in the 1.3260 � 1.3280 area. It is reinforcing by the 1.3277 (50% retracement from 1.2872 to 1.3681 advance). Further weakness might open the way toward 1.3247 end March low. Initial resistance holds 1.3370 former support. A return above this level may push toward 1.3430 last Friday’s high.
GbpUsd last week break of 1.9823 former support (61.8% retracement of the 1.9733-1.9969 rise) paved the way for a retreat towards 1.9677 trend and found support at 1.9659 (50% retracement of the 1.9184 to 2.0134 advance) and further setback towards 1.9592, April 9 low may still be possible. Resistance zone is located at 1.9793 last Friday’s high.
UsdJpy bull trend remains strong having broken 122.22 former trend high. Market hit today 123.33 high. Market seems looking for more advances toward 123.59 and 125.57 December 2002 high. Area from 122.60 to 122.22 (former Trendline) marks initial support.
UsdChf strong advance from last week’s 1.2148 low and 1.2438 former resistance have open the way for a run toward 1.2573 and 1.2771 trends high. Yesterday 1.2470 high marks initial resistance. Initial support holds 1.2410 (former resistance).
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland