At 2:00 AM Germany June Construction Orders y/y (exp n/f, prev 16.0%), At 2:45 AM France Q2 Payroll Employment prelim y/y (exp 1.0%, prev 1.2%), At 6:00 AM Eurozone May Trade Balance Final (exp n/f, prev n/a), Eurozone June Trade Balance Prelim (exp n/f, prev 8.3 bln euro) The dollar struggled in the Tokyo session falling to 118.00 yen as stop-loss selling pushed the currency lower. A better than expected US trade gap provided overnight support for the greenback but eventually succumbed to negative sentiment on Wall Street. While the U.S. trade deficit narrowed in June, it remained near record-breaking levels at $37.16 billion. The figure for May was revised to show an even larger gap of $37.85 billion from the previous estimate of $37.64. Falling US stocks added pressure to the dollar in Japanese trade, with the Dow Jones and Nasdaq losing 1.32% and 1.29%, respectively, on Tuesday.
The euro's gains were capped at 98.46, just shy of the 38% retracement of the move down from 1.0201 to 96.21. Only a breach of 99.10, the 50% retracement of the same move, will turn sentiment bullish. Support is seen at 98.20, followed by 97.90, 97.50, and 97.22, the 68% fibonacci retracement of the move up from 96.21 (August 6) to 98.90 (August 14). Resistance stands at 98.50, and 98.90, the high from August 14. Japanese economic activity fell 0.1% in June from the previous month, while the Tertiary index, the core component of the all-industries index comprising mainly of the services industry, fell 0.3%. The all-industries index rose 0.2% in Q2 from the previous quarter, while the tertiary index fell 0.3% from the previous quarter. This further increases worries that a stronger yen and an uncertain US business outlook may derail Japan's fragile recovery. Hedge selling by Japanese banks ahead of their first-half book-closings at the end of September had hit the Nikkei average futures, causing arbitrage selling, is now seen to be running out of steam. The Tokyo index shrugged off Wall Street losses, advancing 21.92-pts to close at 9,642.61.
USDJPY now trading at 118.00, stops triggered around 118.40-50 yen pushed the pair lower. Support stands at 117.90, 117.30 and 117. Resistance seen at 118.20, the 38% fibonacci retracement of the move down from 121.33 (August 9) to 116.30 (August 14), followed by 118.80, 119.26, the session high, and key resistance is seen at 119.40. Cable hit a session high of 1.5330, with resistance eyed at 1.5360. Subsequent ceiling is seen at 1.5468, the high from August 14th. Cable support is seen at 1.53, followed by at 1.5210, its previous one-month lows. Swissie gained slightly on the dollar while easing against the euro. USDCHF is steady at 1.4936, with support seen at 1.49. Subsequent support eyed at 1.4853, with a firmer base found at 1.4750/60. Resistance is seen at 1.4960, 1.50, 1.5150/60, a high from the daily chart, and a key level at 1.52, which lies on the major downward support turned resistance line extending from the 1.6108 low (June 2000) through 1.5895 (January 2001) and 1.5590 (September 2001).