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At 4:30:00 AM UK June Unemployment Rate (exp 3.1%, prev 3.1%) UK June Claimant Unemployment Count (exp -2k, prev -7k) UK MPC Minutes of BoE July Meeting (exp n/a, prev n/a) UK May Average Earnings 3 month y/y (exp 3.9%, prev 3.3%) At 6:00:00 AM E-12 May E-12 Industrial Production y/y (exp -1.5%, prev -1.2%) E-12 June E-12 HICP y/y (exp 1.8%, prev 2.0%) E-12 June E-12 HICP ex food & energy (exp 2.5%, prev 2.6%) E-12 May E-12 Industrial Production m/m (exp -0.1%, prev -0.5%)
The dollar was little changed from its New York close against the euro at 1.0120 and 116.20 yen, but further losses in the Dow overnight bode poorly for the greenback going forward. Greenspan's testimony seemed to calm markets early on but news that Intel missed earnings estimates and said it would cut 4,000 jobs weighed on Wall Street as dealers anticipated investment spending to remain weak. The Dow and S&P each ended down nearly 2% on the day.
EUR/USD failed twice to overcome resistance at 1.0150 and risks correcting back to around 1.0020/30 if it breaks below support at 1.0085 today. But the upside remains in focus and as long as the pair holds above 1.0025/30, the 38% retracement of the 98.35 to 1.0150 rally a move above 1.0150 seems likely. Resistance is seen at 1.0150 followed by 1.0165-70 before more downside pressure starts to form at 1.02. This is the likely level at which the pair is expected to start consolidating. Interim support now seen at 1.0020/30 with subsequent selling expected to be limited at 0.9990, the 50% retracement of the same rally.
USD/JPY again failed to break above 116.40 resistance putting renewed downward pressure on the pair and could now target overnight 10-month lows around 115.45. A break below this key support is seen calling upon 114.34, the February 2001 low ahead of 114.10, the 62% retracement of the 101.25 to 135.15 rally. Key resistance is seen at 116.40, the 62% retracement the decline from 116.95 to 115.45.
Limiting the downside continues to be a belief the Japanese monetary officials will intervene before USD/JPY would fall below the 115 handle, deemed by Japanese exporters as the break even point. Japan MoF's Mizoguchi reiterated today that Japan to take necessary action if needed on forex markets and added that the dollar is unlikely to stay weak over medium term.
Meanwhile, the BoJ upgraded its economic assessment for the fifth consecutive month saying exports are strong but CapEx, consumption, housing and investment remain weak. The central bank also said the fall in global stock markets and the dollar has added uncertainty to the export outlook and that it will pay close attention to unstable moves in the FX and equity markets.
Data from the Eurozone today is expected to show May E-12 Industrial Production fell by 1.5% while June HICP, the inflation index, is predicted to have increased by 2.5% annually. In light of the recent appreciation of the euro, inflation figures for upcoming months may turn out slightly lower. For the U.K., employment statistics and the MPC Minutes of the BoE July Meeting will be released.
Cable held near an overnight 26-month high of 1.5787, just shy of resistance seen at 1.58. Follow up resistance is seen at 1.5835 followed by the key 1.5915, which is the 68% retracement of the decline from the Oct 1998 high (1.7354) to the June 2001 low (1.3680). Meanwhile, support starts at 1.5640, the 38% retracement of the rally from 1.5465.
USD/CHF also looked to retest its lowest level since October 1999 at 1.4454. Subsequent foundation is seen at 1.44 followed by 1.4370. Long-term support stands at 1.3845-50, the 62% retracement of the aforementioned move. Any upside is seen limited at 1.47, 1.4735 and 1.4750.