AFP: Yen Edged Higher after Poor GDP, But No Follow Through Buying Yet
Daily Report: Yen Edged Higher after Poor GDP, But No Follow Through Buying Yet
Yen edged higher on risk aversion as the week starts but quickly pared gains as markets enter into European session. Real GDP in Japan rose merely 0.4% annualized rate in Q2, comparing to consensus of 2.3% and prior quarter's 4.4%. Nominal GDP dropped -0.9% on the quarter to JPY 118T or USD 1.288T, which was below china's nominal GDP of USD 1.337T in the same period. Some analysts said that China's GDP could surpass Japan in 2010. Yen crosses weakened across the board after the release but downside was generally contained above last week's low. Dollar edged higher against Euro, Sterling and Aussie but no follow through buying was seen.
Elsewhere, UK Rightmove house price index dropped -1.7% mom in August, worst in eight months. Eurozone CPI for July is expected to be finalized at -0.4% mom 1.7% yoy in July. From US, empire state manufacturing index is expected to improve from 5.08 to 8.25 in August. TIC capital flow is expected to be steady at USD 36.3b. NAHB housing market index is expected to rise slightly from 14 to 15 in August.
In general, the current support in yen crosses should be temporary. As noted before, AUD/JPY's recovery from 72.67 should have finished at 79.41 and we'd expect further fall to test lower trend line support (now at around 73.5) level in near term. Also, while consolidations from 71.86 might extend further, we'd expect whole fall from 88.04 to resume for another low below 71.86 sooner or later. Any recovery should be limited below 79.41 resistance.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.8887; (P) 0.8961; (R1) 0.9000; More
AUD/USD dips further to as low as 0.8858 today and at this point, intraday bias remains on the downside for further decline. Current fall from 0.9220 is expected to target lower channel support (now at 0.8668). Further break there will indicate that whole choppy rise from 0.8066 is finished too and deeper decline should be seen to retest this support level next. On the upside, above 0.9033 minor resistance will turn intraday bias neutral first and bring recovery. But risk will remain on the downside as long as 0.9220 resistance holds.
In the bigger picture, note that a medium term top is in place at 0.9404. Price actions from there are viewed as consolidation/correction to medium term up trend from 0.6008. Such consolidation/correction will continue below 0.9404 for a while and the path could be choppy and unpredictable. Though, firstly, even in case of another rise, we'd expect strong resistance neat to 0.9404 to limit upside and bring another fall to continue the consolidation. Secondly, a break of 0.8315 will suggest that the whole correction is going to extend deeper to beyond 0.8066 support, possibly to 0.7702 key support.
Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:01 GBP Rightmove Home Price M/M Aug -1.70% -- -0.60%
23:50 JPY GDP Q/Q Q2 P 0.10% 0.60% 1.20% 1.10%
23:50 JPY GDP Annualized Q2 P 0.40% 2.30% 5.00% 4.40%
23:50 JPY GDP Deflator Y/Y Q2 P -1.80% -1.80% -2.80% -2.80%
23:50 JPY Tertiary Industry Index M/M Jun -0.10% -0.10% -0.90%
9:00 EUR Eurozone CPI - Core Y/Y Jul 1.00% 0.90%
9:00 EUR Eurozone CPI M/M Jul F -0.40% 0.00%
9:00 EUR Eurozone CPI Y/Y Jul F 1.70% 1.40%
12:30 USD Empire State Manufacturing Aug 8.25 5.08
13:00 USD Net Long-term TIC Flows Jun 36.3B 35.4B
14:00 USD NAHB Housing Market Index Aug 15 14
