The dollar came under further selling pressure in London trade this morning, triggering stops on its way to a new one-month low of 99.38 cents to the euro and a two-week low of 117.06 yen. Even though the Nikkei and European bourses were down over 3% this morning, traders appeared to be reacting more to the sharp decline in US equity futures and pushed the greenback lower. Key US data today includes the Challenger jobs report and the preliminary August manufacturing ISM data, expected to rise to 50.8 from 50.5. On Friday, a surge in the Chicago purchasing managers' index lifted the dollar from its doldrums following weak consumer confidence reports. The Chicago PMI index posted a surprising jump to 54.9 in August from 51.5 in July, indicating that the nation-wide PMI should remain above the key 50 level after falling to 50.5 in July.
While this would be a positive for US markets and confidence, US equity futures are pricing in further weakness in stocks this morning. Recall the Dow was rejected last week at the 9,000 level, making some traders nervous about another selloff targeting July's lows. EUR/USD rose to a session high of 99.38, after triggering stops on a break of key resistance at 98.90 and 99.10. Resistance is now seen at 99.40 ahead of 99.75, the 62% retracement of the 1.02-96.20 decline. According to the futures CFTC data from the IMM, speculators added to their net long positions in non-dollar contracts last week. After weeks of pairing back on their longs, euro contracts saw a strong rise to 22,088 in net long positions from the prior week's 17,863. This indicates that speculators expect to at least see another test of parity in the coming weeks. In fact, EUR/USD remains on a solid uptrend from 96.60, with key support now seen at 98.40. Only a break below this trendline and Fibonacci support would jeopardize further euro gains.
Cable rose alongside EUR/USD to a new 1-month high of 1.5595, breaking resistance at Friday's high of 1.5545, but is struggling to maintain above 1.5586, the 38% retracement of the rally from 1.5143 (July 5) to 1.5866 (July 26). Support seen at 1.5545 and 1.5460. The Nikkei fell 3% to a new 18- year low this morning but failed to bring down the yen despite signs of renewed economic weakness. On Friday, Japan's GDP rose 0.5% in April-June, better than expected, but was offset by a downward revision of the previous quarter to 0% from an initial 5.7%. While the news is very troublesome to government officials and investors, traders were reluctant to sell yen because of repatriation fears. Moreover, given that Japanese officials are prone to meddling in the market, traders may be waiting on the sidelines for an indication as to whether or not the government may try to boost stock prices.
USD/JPY fell to a 2-week low of 117.83 after failing to break the 119 level overnight. Fears of seasonal repatriation appear to be supporting the yen. USD/JPY triggered stops after falling below 117.70, the 61.8% retracement of the rise from the 115.55 low to the 121.32 high, and now risks a further selloff targeting 117.00 support ahead of the 115.55 lows. Resistance still seen at 117.70 ahead of 119.00 and 119.50.
US economic data to be released this week include August ISM Manufacturing, July Construction spending, July Factory Orders, August ISM Non-Manufacturing, August Non-Farm Payrolls and August Unemployment Rate. Japanese economic highlights for the rest of the week consist of MoF Q2 Corporate Capex, July Leading Indicator, and July Household Spending. Eurozone economic data for this week will see France Q2 GDP, Eurozone July Unemployment Rate, UK August CBI trade survey, Germany July Manufacturing Orders, Germany July Retail Sales, Germany August Unemployment Rate, UK July Manufacturing Production, UK July Industrial Production and Eurozone preliminary Q2 GDP. ///www.forexnews.com