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Weaker JPY Ahead of BoJ Statement

Mon, Mar 19 2007, 13:48 GMT
by Johan Ditz Lemche

Saxo Bank

JPY-related crosses went lower and the USD came back somewhat on a relatively slow day due to lack of interesting data. Later this week housing data will be the focus point for the USD.

MAJOR HEADLINES – PREVIOUS SESSION

USD

After a busy last week, the market has been fairly quiet with regards to data and is positioning for another leg - we expect the US housing market data to be the focus of the week as the recent slump in the housing market has recieved a lot of attention. Later today the NAHB housing Market Index is released, expected to drop to points to 38, and tomorrow the housing starts and building permits will be released. On Friday the Exisiting Home Sales will be released. Of course the rate announcement and more the following statement will be of interest on the FOMC meeting tomorrow and Wednesday, where Chairman Ben S. Bernanke and his colleagues will most likely debate changing their tilt toward higher interest rates. They may even add language to their statement underscoring their concern about weakening economic conditions. That would allow them to set up expectations for a change in their rate outlook in case the economy deteriorates more than expected. We are holding our horses on the EURUSD to get some more direction and see the pair finding short term support at 1.3270, resistance at 1.3370.

The USDCHF also retraced a little higher after Friday's major drop as investors turned into carry trades again.

From our FX ORDER BOOK we are close to go long AUDUSD at the break of 0.8005 which will give scope for test of new highs. Suggested stop at 0.7985, targeting 0.82

From Friday:

JPY

A lot of focus on the JPY with both Fukui and Pboc out putting pressure on the JPY. But we still need to see a firm break of 114.00 in USDJPY to confirm a longer term bearish technical picture. Next week's rate decision should be a non-event as they keep rates on hold. Fukui sort of confirmed this as he was quoted saying the unit labor cost will likely gradually start to increase, but it will take time, telling the market that CPI is not the only thing that has the elevate before taken a more hawkish stand on rates. Today's US CPI should be trend setter fro carry trades looking weeks ahead. A reading below estimate should send USDJPY significantly lower and put additional pressure on such pairs as GBPJPY, NZDJPY and AUDJPY.

EURUSD

The pair broke 1.3260 in Asia and the bidding has continued through early European session. Breaking the 2007 highs at 1.3370 looks likely if the US CPI and US Capacity Utilization comes out lower than expected, which is our preferred scenario.

FX ORDER BOOK

Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.

Euro/US Dollar

( 1.3306   -   13:34 GMT, Mar 19, 2007 )

Support:  

1.    1.3240

2.    1.3050  fibo support.

3.    1.2870 lows from January 07.  

4.    1.2765 wave support and start of the Nov. 06 uptrend.  

Resistance:  

1.    1.3370 - Prior highs.

British Pound/US Dollar

( 1.9464   -   13:34 GMT, Mar 19, 2007 )

Support:

1.   1.9260 - base support in Jan. 07. 

2.   1.9180 - old top from mid Nov. 06.

3.   1.9075 - brake out level from Nov. 06.

Resistance:

1.    1.9550

2.    1.9680 - resistance at the current wave

3.    1.9916 highs from 07. 

US Dollar/Japanese Yen 

USDJPY  (117.31 @ 13:34 GMT)

Support:

1.   115.15 - current wave low.

2.   114.53

3.   114.00

Resistance:

1.   117.65 - 200 MA

2.   117.89

3.   118.40

Published on  Mon, Mar 19 2007, 14:00 GMT