At 4:30:00 AM UK May Ind Prod m/m (exp 0.0%, prev -0.1%)UK May Ind Prod y/y (exp -1.0%, prev -0.8%)UK May Manuf. Output m/m (exp -0.1%, prev -0.9%)UK May Manuf. Output y/y (exp -0.6%, prev 0.0%)
The dollar extended overnight gains against the euro and yen in Asian trade, following the better-than-expected June US non-manufacturing NAPM showing a rise above the 50-mark for the first time in 3 months. Negative sentiment surrounding the European Central Bank's decision to keep rates on hold, as well as Japan's acceptance for a weaker yen are also weighing on those currencies.
The greenback rose to a new three-month high of 125.96 yen despite earlier profit taking around 125.80. The dollar then built a base around 125.40 and is now eying 126. . Resistance is seen at 126.00 ahead of 126.30 and the year's high at 126.80/85. Support is seen at 125.40 followed by 125.00.
Yesterday, the dollar shot through resistance at 125-yen after failing to break that level all week. Acting as a catalyst to the yen's decline was a remark by Japan's Vice Finance Minister Kuroda that he would tolerate a weaker yen as long as it reflected economic fundamentals. The pair's break of 125 is in line with the sentiments of most dealers that the yen will begin to ease further as the Japanese economy slides into a recession and the Bank of Japan eases monetary policy further. However, recent comments from PM Koizumi and Finance Minister Shiokawa hint that Japan prefers a slow fall in the yen.
Also weighing on the yen was Wednesday's statement by the Nikkeiren business group that the yen was overvalued against the euro. The head of the group, Hiroshi Okuda, said a euro/yen rate below 106 was unsatisfactory, citing 110 as a more appropriate level. Finance Minister Shiokawa agreed with Okuda's assessment but euro sentiment remains bearish and the pair fell to an overnight low of 105.08 in the aftermath of the ECB's decision to not lower rates and the stronger than expected NAPM survey.
The euro also extended its losses against the dollar at the start of Asian trade to a fresh 8-month low of 83.49. However, the single currency is seen supported around 83.50. A break below that level is seen calling upon the euro's all time low of 82.27.
Euro weakness dragged down the Swiss franc and sterling against the dollar. Swissy rose 1-and-half francs to an 8-month high of 1.8216. Resistance is seen at 1.820 and 1.830. Support stands at 1.810, 1.8060 and 1.80.
Cable also fell by three-fourth cents to a 2-week low of 1.3994 and remains hovering around 1.40. The pound was little affected by the anticipated decision by the MPC to not cut rats. Strong consumer demand and rising inflation outweighed concerns of the manufacturing sector that UK interest rates are still the highest among the Group of Seven leading industrialized nations at 5.25%.
Today's data from the UK is expected to show industrial production remaining flat for the month of May, pushing manufacturing down further.