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At 4:30:00 AM UK June PPI Output (y/y) NSA (exp 0.1%, prev 0.1%) UK June PPI Input (y/y) SA (exp -6.3%, prev -6.2%) UK June PPI Output (m/m) NSA (exp 0.1%, prev 0.3%) UK June Manufact. Output (m/m) (exp 0.1%, prev 0.1%) UK June PPI Input (m/m) SA (exp -0.2%, prev -0.7%) UK June Manufact. Output (y/y) (exp 0.5%, prev 0.4%)
A broad based selloff in the dollar pushed the greenback to session lows of 98.65 against the euro and 119 yen in Tokyo trade. Comments from Japanese FinMin Shiokawa on Saturday that the dollar could fall to post September 11 lows around 116 yen encouraged dollar bears who were still fearful of intervention after the last coordinated intervention on June 28. Recall that the BoJ stepped in to sell yen for dollars and euros with the help of the Fed and the ECB at around the 118.35 yen level. The sharp 130 pip drop in USD/JPY from a high of 120.30 pushed the euro 1.3 cents higher from its open at 97.30 to a day's high of 98.65 before easing off. Resistance is seen at 98.80, the 62% retracement of the 99.90 to 97.15 decline.
Shiokawa's comments are especially significant since they were referred to as the opinion of the leaders at the ASEM meeting rather than just reflective of his own opinion. Although MoF senior official Mizoguchi attempted to relieve the downward effect on USD/JPY today by playing down Shiokawa's comments, the dollar remains sluggish across the board, especially given that the Finance Minister himself uttered those clear remarks, including the reference to post Sept. 11 price low. It is also worth mentioning that Shiokawa is an advocate of free market forces and not particularly in favor of interventions.
Nikkei is steady in afternoon trade after initially nearing the 11,000 mark. Tokyo shares rebounded with the sharp rise in US equities on Friday but yen strength is seen sapping the earnings of key exporters.
USD/JPY support is seen at 119.00 followed by 118.80 and 118.35 where the BoJ last stepped in to sell yen for dollars and euros with the help of the Fed and the ECB. A break below 118.80 should trigger intervention fears. But it is doubtful whether traders will be dissuaded from further dollar selling at those levels given Shiokawa's comments. Moreover, it may be argued that the BoJ will have to wait for the dollar to begin rising of its own accord before initiating intervention. Resistance is seen at 119.50/60, 120.00 and 120.45/50.
EUR/USD rocketed to a session high of 98.66 after testing the 97-cent level on Friday. That area marked the key 50% Fibonacci support of the 94.10 to 99.90 rally and failure to penetrate that level despite the strong surge in US equities on Friday gave hope to bargain hunters wanting to long EUR/USD. However, key resistance at 98.80, the 62% retracement of the 99.90 to 97.15 decline, must first be broken to give confirmation of a return to the rally. Failure to overcome this mark could lead to another leg down in a larger more complex correction. Support is seen at 98.50, 98.20, 97.50 and 97.10.
The euro also reasserted itself against the pound after falling over one pence since peaking at a 33-month high of 65.25 2-weeks ago. EUR/GBP rose to a session high of 64.35 but weakness against the euro did not hold sterling back from rising against the fledgling greenback. Cable rose to a session high of 1.5330, up one cent on the day and up nearly 2 cents from Friday's low of 1.5145. Resistance is seen at 1.5330, 1.5360 and this year's high of 1.5377.
USD/CHF also fell as accounting woes should continue to keep safe haven flows out of US assets in the near term. The dollar plunged 2 centimes to a session low of 1.4887. Support is seen at 1.4870, the 62% retracement of the 1.4735 to 1.5084 rally, followed by 1.4830 and 1.4800.