USDJPY – verbal interventions (won’t make things better for the yen)
In line with our expectations, USDJPY made fresh 15 years lows, this time at 83,31. While we see some fundamental factors arguing for a larger correction or even a trend reversal on the pair, the short term dynamics is a result of a failed attempt of the Bank of Japan to limit appreciation of the yen. BoJ did too little last week and thus encouraged markets to try and move lower. The new low echoed comments both from BoJ and the finance minister, worried about economic prospects, but this rhetoric is not enough to turn things around.
Technically, one may keep an eye on the 83,20 - 161,8% expansion of the May’s decline. If the expansion was about to be the wave 3, the pair could be heading even towards historical lows of 79,75. There is also an interesting pattern on the pair – after making a new low, USDJPY defends at the 1st test but fails at the second and consequently moves lower (as presented on the chart).
EURCHF – new historical lows
Declines on the EURCHF were started with the heavy sell-off on the EURUSD during the Tuesday’s Asian trading. Consequently, two weekly hammers (a good chance for a turn-around) are the history, and the pair heads lower. One might notice that a recent upward correction was similar in scale and location to the move from mid-June (pink rectangles on the chart) which last time was followed by a major decline. If the history was about to repeat, the EURCHF would look towards (scary for the SNB) 1,2370.
EURUSD – rebound from supports
The decline in the EURUSD yesterday was the largest since August 11th. The reasons for the move were described yesterday. What is important, the pair used a support line, drawn on previous local lows. That increases a likelihood for a longer consolidation between 1,2588 and 1,2920.
Events to watch – output in Europe, rates and data in Canada, Beige Book and Australian employment
After two lackluster calendar days, Wednesday is getting crowded. While none of the releases is a true market mover, they play their part in painting a broader picture and affect “lesser” majors (USDCAD, AUDUSD). We start from output data in UK (4.30 ET, 10.30 CET, +0,3% m/m expected) and Germany (6.00 ET, 12.00 CET, exp +1,1% m/m). Then we move to Canada for the key day of macroeconomic releases: building permits (8.30 ET, 14.30 CET, -4,2% m/m exp.) and Ivey PMI (10.00 ET, 16.00 CET, 55,9 exp) and fore mostly for the BoC decision (9.00 ET, 15.00 CET, a hike of 25 bp is anticipated). Later on (2.00 PM ET, 20.00 CET) the Fed will release the Beige Book which might cast some light on a row between deteriorating regional activity indices and a still solid national ISM. Aussie investors should pay attention to the employment figures (9.30 PM ET, 3.30 CET, +25,3k expected).
