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At 8:30:00 AM US May Trade Balance (exp $-34.8 bln, prev $-35.9 bln) US June CPI m/m (exp 0.1%, prev 0.0%) US June CPI m/m ex food & energy (exp 0.2%, prev 0.2%)
The dollar came under renewed pressure in Tokyo trade after another down day on Wall Street, hitting a 2-1/2 year low of 1.0210 against the euro. US stock market losses continue to take a toll on the greenback as the Dow approaches last September's 3-year lows. Technology shares also plunged, pushing the Nasdaq down nearly 3%, which took nearly 150 pips off of USD/JPY to a session low of 115.73. However, intervention fears continue to play on the pair and dealers do not anticipate steep losses in the dollar against the yen.
With no key economic data from the Eurozone, today's main focus will fall on the 8:30 AM release of the U.S. May Trade Balance, predicted to show a trade deficit of $34.8 billion, slightly smaller than the $35.9 billion deficit figure from April. Some forecasts, however, expect the imbalance to swell to as much as $39 billion, which would increase anxiety over the rising current account deficit and the lack of capital inflows to finance it. This in turn could prompt further dollar selling in the near term.
EUR/USD reached a 2-1/2 year low of 1.0210 after breaking resistance at 1.0150. Resistance is now seen at 1.0200 and 1.0250 followed by 1.0280. Support is seen at previous resistance of 1.0150/40 followed by 1.0125 and 1.0100.
USD/JPY fell from an overnight high of 117.30 to a session low of 115.73 and could target this week's 10-month low of 115.45. Resistance is seen at 116.40 followed by 116.65, 116.95 and 117.30. A break below 115.45 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. However, intervention fears continue to dog the market and it will be key for the dollar's near term direction to see how Japan would react to a fall below 115.45. Strong intervention could give renewed vitality to the pair. But more incongruous statement from Japanese monetary officials might further weigh on the dollar.
Japan FinMin Shiokawa said today he is concerned about rapid movements in the forex markets and that Japan is cautiously taking various measures on the forex market. But BoJ Governor Hayami explained that dollar weakness is due to problems in US which shed doubt onto whether the Japanese will definitely intervene below 115.45 or not. Most dealers say a move below 115 would be the key breaking point. The market seems to be responding more to recent remarks that Japan is always in contact with overseas authorities on foreign exchange matters. Moreover, BoJ Governor Hayami further explained that the yen's rise isn't due to yen strength, but rather the dollar's weakness and that accounting scandals, the Middle East situation, and worries over corporate profits should not continue indefinately.