A trading week officially started yesterday but actually starts today with the US institutions back from the Independence day celebrations. Keeping in mind a massive package of a pessimistic indicators being served prior to the weekend it is important what sort of moods are going to dominate after the break. The impact from Wall Street might be decisive for the EURUSD as well as the pair might look forward to extend the last week’s rally.
China buys Japanese bonds
During the eye storm of the Greek crisis the Chinese authorities assured there were not interesting in diversifying away from the euro. And while they might had not sell the European currency directly, they were simultaneously adding the Japanese yen for those nervous times. The Japanese Nikkei daily reported today that the Chinese increased the holdings of the JPY gov bonds by 6,2 bln within the Jan-Apr period, the number some eight times greater than the sum of a net decrease in the whole 2009. There no estimates for May or June, but given increased market nervousness and a major appreciation of the JPY, that number might have well increased.
The news is clearly yen positive and might exert a further selling pressure on the USDJPY, especially if the slide on equities is about to continue (which is not unlikely). Technically the pair merely paused after a solid slide since the mid-June. Any reverse action was tempered by a key level of 88,00. Should it be conquered (on a sort of relief rally on global markets), the pair might inch up to the next resistance of 88,95. But in the mid and long perspective, the advantages of the sellers are evident. The pair might be looking at support of 87, 86 and 84,85.
Events to watch – US ISM services, Canadian permits
The data about to be released today are of secondary importance, with the US ISM services as a key one (10.00 ET, 16.00 CET, exp at 55,1 pts.), even though the industrial ISM still serves as a better indicator of future developments in the US economy. Canadian building permits (8.30 ET, 14.30 CET, -1,3% m/m expected) are the first among the figures released from the tinniest but the most vigorous G7 economy this week.
