The Yen gained broadly on Wednesday morning session, as volatile global stock markets and concerns about fallout from the US sub-prime mortgage sector prompted investors to unwind carry trades. The Yen has rebounded from recent multiyear lows with the unwinding of carry trades sparked by worries that sub-prime loan problems could spill into the broader economy.
Also, precious metals are being liquidated during the current wave of risk aversion; Gold fell to its lowest in 3 months of 638.90 while Silver hit a 5 months low of 12.1375.
Yesterday, the Federal Reserve began a two-day monetary policy meeting. The Fed is widely expected to keep the benchmark interest rate steady at 5.25%.
News and Events:
The Yen gained broadly on Wednesday morning session, as volatile global stock markets and concerns about fallout from the US sub-prime mortgage sector prompted investors to unwind carry trades. The Yen has rebounded from recent multiyear lows with the unwinding of carry trades sparked by worries that sub-prime loan problems could spill into the broader economy.
UsdJpy was up 0.28% to 123.29 reversing from intraday low 122.24, after Japanese news wires reported several large Japanese mutual funds will close to new investors. Some market participants interpreted this to mean less capital outflows from Japan, suggesting a stronger Yen. Analysts said the Yen still benefited from comments this week by Japanese Finance Minister Koji Omi, who cautioned that market should be aware of the risk of one-way bets against the Yen. Officials from New Zealand and South Korea have also voiced concerns over Yen weakness.
AudJpy went down to 102.20 low, hurt by a decline in commodities, before closing -0.15% to 103.54. Gold fell to its lowest in 3 months of 638.90 while Silver hit a 5 months low of 12.1375 yesterday. Precious metals are being liquidated during the current wave of risk aversion.
Yesterday, the Federal Reserve began a two-day monetary policy meeting. The Fed is widely expected to keep the benchmark interest rate steady at 5.25%.
Today’s Key Issues (time in GMT):
08.00 EUR May Euro-zone M3 3month averaged 10.6% vs 10.4%
08.00 EUR May Euro-zone M3 10.3% vs 10.4%
08.15 EUR ECB’s Constancio speaks at Conference on EU Presidency
12.30 CAD May Industrial Producer Price 0.0% vs 0.2% (MoM)
12.30 CAD May Raw Materials Price Index 0.8% vs 3.3% (MoM)
12.30 US 1Q Core PCE price final 2.2% vs 2.2%
12.30 US 1Q GDP deflator final 4% vs 4%
12.30 US 1Q GDP final 0.8% vs 0.6%
12.30 US June 23rd Initial Jobless Claims 318k vs 324k
13.30 EUR ECB’s Gonzalez-Paramo, EU’s Almunia speak in Turkey
15.00 US May Help Wanted Index 29 vs 29
18.15 US FOMC Rate decision expected 5.25% vs 5.25%
22.00 EUR May French Unemployment Rate 8.1% vs 8.2%
22.45 NZD 1Q Gross Domestic Product 2.4% vs 2.1%
23.30 JPN May Jobless rate 3.9 vs 3.8
23.30 JPN June Tokyo Consumer Price Index 0.1% vs 0.0% (YoY)
23.30 JPN May National Consumer Price Index -0.1% vs 0.0% (YoY)
The Risk Today:
EurUsd Short term positive trend from last week remains active and focus shifted on 1.3500 and 1.3554 resistance from early June high. Renewed weakness below 1.3373 could open the way toward 1.3277 key support (50% retracement from 1.2872 to 1.3681 advance). Initial support holds 1.3373 last Thursday low.
GbpUsd bull trend from Friday 8 June will retest 2.0017 high from Tuesday. Further advance will focus on 2.0100 trend levels. Initial support holds 1.9912 Friday low. On the down side, despite 1.9823 support (61.8% retracement of the 1.9733-1.9969 rise); a return under 1.9900 could deep toward 1.9700 and 1.9659 (50% retracement of the 1.9184 to 2.0134 advance) next support.
UsdJpy had hit 124.15 Friday high but reversed gains in the last 3 sessions down to 122.24 yesterday. Market found support there with 122.22 (former Trendline). Renewed advance through 124.15 will reopen the way toward 125.57 December 2002 high.
UsdChf still consolidates on 1.2290 support (38.2% retracement of 1.1996 to 1.2470 advance) after hitting 1.2470 high on June 14th. This 3-months high 1.2470 marks the initial resistance. Return of the Dollar bull trend would open the way for a run toward 1.2573 and 1.2771 trends high. On the current downtrend, market is holding on 1.2290 support (38.2% retracement). A move lower than that will open the way toward 1.2178 support (61.8% retracement of 1.1996 � 1.2470 advance).
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland