Published: September 24, 2007 6:48 PM
With no major economic releases in the United States, traders took the opportunity to take profits in their long JPY carry trade and short dollar positions. [B]The JPY crosses held their losses in Asia and London as USD/JPY slipped back below 115.00.[/B] The dollar found buyers after EUR/USD made new all-time highs in London but was not able to garner more momentum and slipped back below 1.4100. GBP/USD rallied through
2.0300 overnight but quickly sold off before making a firm hold at 2.0200.
From a macro perspective, the recent counter move is coinciding with action in other markets. [B]Commodities including oil and gold are stalling after rallying the past few weeks. [/B] Typically, the relationship between gold and the dollar are negatively related so a decline in gold could give the dollar a bid. Also, US equity markets ended the day lower despite having traded higher in the morning. If we see a sell off in equities, we could see risk reduction in the market which could be negative for the JPY and CHF carry trade.
Looking forward, we have a week of heavy economic data. Tonight�s Bank of Japan meeting minutes will be interesting. The BOJ was planning on increasing interest rates in August before the credit debacle but held and has seen weaker than expected Japanese data. [B]If the BOJ looks to further delay interest rate increases, we could see a resurgence of the JPY carry trade[/B]. In the US, traders will focus on how the housing market is affecting the US economy as they consider Gross Domestic Product, Consumer Confidence, as well as new home sales.
[U]Upcoming Data Releases (Asia Session):
Japan: (7:50pm ET) Bank of Japan Monetary Policy Meeting Minutes for August (relevance: high). Year over year Corporate Service Price Index expected 1.6% vs. previous 1.6% (relevance: medium).[/U]