The Yen fell to a lifetime low against the Euro on Monday and hit a 4 �-year low against the Dollar on a growing view that Japanese interest rate further rises will be outpaced by other Central Banks. The yen has fallen across the board since Bank of Japan Governor Toshihiko Fukui said late last week he had no preconceived ideas about a future rate rises, cooling expectations of a rate increase in July. Most market players are looking for the BoJ to raise rates to a 12-year high of 0.75% in August.
The Euro has strengthened as market players see the European Central Bank lifting rates twice more this year to 4.5% while the Federal Reserve is now widely seen keeping rates on hold at 5.25% rather than cutting them.
Looking ahead, market players will look to today figures on US Housing Starts, Building Permits and June Germany’s ZEW survey.
News and Events:
The Yen fell to a lifetime low against the Euro on Monday and hit a 4 �-year low against the Dollar on a growing view that Japanese interest rate further rises will be outpaced by other Central Banks. EurJpy rose to a lifetime 166.11 this morning before trimming gains to 165.92, little changed from Monday. Investors kept favoring carry trades funded with the low-yielding Japanese currency. The yen has fallen across the board since Bank of Japan Governor Toshihiko Fukui said late last week he had no preconceived ideas about a future rate rises, cooling expectations of a rate increase in July. Most market players are looking for the BoJ to raise rates to a 12-year high of 0.75% in August, but such move is not expected to slow the growing carry-trades.
Japanese Finance Minister Koji Omi said, in what may be an intentional signal, that he is �watching currency rates carefully� last Friday. It’s hardly verbal intervention, but with the Yen hitting record lows versus the Euro and 4�-year against the Dollar, any change in official Tokyo comments could be significant. Today, Omi reiterated that Foreign Exchange rates should reflect economic fundamentals and that he would not comment on specific currency levels.
The Euro has strengthened as market players see the European Central Bank lifting rates twice more this year to 4.5% while the Federal Reserve is now widely seen keeping rates on hold at 5.25% rather than cutting them. The Dollar has slipped against the Euro in the past few sessions, giving up some gains as benchmark US Treasury Yields have fallen back after last week’s spike to five-year highs on a brightening US economic outlook.
Looking ahead, market players will look to May figures on US Housing Starts, Building Permits and June Germany’s ZEW survey. Analysts would see it a downturn in the Housing Market, a soft spot for the economy, has finally bottomed out. Economists forecast that Housing Starts would slow to an annualized 1480k in May from 1528k in April.
Today’s Key Issues (time in GMT):
07.15 EUR ECB’s Bini Smaghi holds speech in Berlin
08.45 EUR ECB’s Ordonez speaks
09.00 EUR June German ZEW, Economic Sentiment 29 vs 24
09.00 EUR June German ZEW, Current Situation 87.5 vs 88
11.00 CAD May Consumer Price Index 0.5% vs 0.4% (MoM)
11.00 CAD May Consumer Price Index 2.2% vs 2.2% (YoY)
11.00 CAD May Bank of Canada CPI 2.3% vs 2.5% (YoY)
12.15 US Fed’s Minehan gives introductory remarks at Bank’s Conf
12.30 US May Housing Starts 1480k vs 1528k
12.30 US May Building Permits 1470k vs 1457k
21.00 US June 17 ABC Consumer Confidence Index -12 vs -13
23.50 JPN Bank of Japan Monetary Policy Meeting Minutes for May
The Risk Today:
EurUsd continued its advance from Friday’s rebound on 1.3260 � 1.3280 area support. Recent break up of 1.3373 resistance gave room for further advance toward 1.3500 and 1.3554 resistance from early June high. Renewed weakness might chase the 1.3277 key support (50% retracement from 1.2872 to 1.3681 advance). Initial support holds 1.3373 former resistance.
GbpUsd is holding over 1.9823 support (61.8% retracement of the 1.9733-1.9969 rise) since Friday’s rebound away from 1.9677 trend low. Further strength will open the way toward 1.9900 key level. On the lower side, a return lower than 1.9700 will chase the next support at 1.9659 (50% retracement of the 1.9184 to 2.0134 advance).
UsdJpy remains strong after hitting 123.75 yesterday high. Further advance might open the way toward 125.57 December 2002 high. Strong support is located at 122.22 (former Trendline) and initial support holds 123.10 last Thursday/Friday conjunction.
UsdChf corrected from Thursday high 1.2472 and six consecutive day advance. This 3-months high 1.2472 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 looking for next support 1.2359 (23.6% retracement of 1.1996 to 1.2470 advance) and further set back to 1.2290 (38.2% retracement).
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland