JPY weakened during today’s Asian session, after having a strengthening against the USD yesterday, as tensions seem to ease somewhat. JPY initially strengthened further as the US had blamed the Chinese side for letting the CNY to weaken against the USD over the level of 7 Yuan’s per US Dollar, a record high. The drop of the CNY was sharp and the US had threatened to label China as a currency manipulator, which could have further adverse effects on the US-Sino trade relationships. Media had characterized China’s move to let the Yuan depreciate against the USD as a counter move for Trump’s newly announced tariffs and also mentioned the possibility of the trade war turning into a full blown currency war. On the flip side China’s media have blamed the US of “destroying international order” as trade tensions rapidly escalated. We maintain the view that should tensions ease further we could see JPY weakening more against the USD as its role as a safe haven could be undermined. USD/JPY rallied during today’s Asian session, breaking the 106.00 (S2) and the 106.60 (S1) resistance lines (now turned to support). Should trade tensions ease further we could see the pair rising further, while on the other hand should there be another escalation of the tensions in the US-Sino trade war, we could see the pair once again dropping. Should the bulls take over we could see the pair breaking the 107.20 (R1) resistance line and aim for the 107.90 (R2) resistance hurdle. Should the bears dictate the pair’s direction, we could see USD/JPY breaking the 106.60 (S1) support line and aim for the 106.00 (S2) support level.
RBNZ Interest rate decision
Tomorrow from New Zealand, during the Asian session (02:00 GMT) we get RBNZ’s interest rate decision. The bank is expected to cut rates by 25 basis points and lower them to reach 1.25%, as currently the market seems to have fully priced in the cut (NZDOIS 100% for a rate cut). Albeit today’s employment data release outperformed expectations with the unemployment rate for Q2 reaching a record low of 3.9%, it may not prove enough to avert a rate cut in tomorrow’s meeting. With the market fully expecting a rate cut as mentioned, should the bank do so, we could see market attention turning to the accompanying statement. Should the bank maintain a dovish tone, say for example due to global uncertainty and imply that further rate cuts are on their way, we could see the Kiwi weakening, otherwise it may get some support. Also, the bank’s economic projections and RBNZ Governor’s speech later on could also play a major role in the currency’s direction. NZD/USD got some support during today’s Asian session as New Zealand’s employment data outperformed expectations, yet relented quickly any gains made, and once again tested the 0.6520 (S1) support line. As the pair’s price action remains under the downward trendline incepted since the 22nd of July we retain a bearish outlook for the pair. Should the pair remain under the selling interest of the market, we could see it breaking the 0.6520 (S1) support line and aim for the 0.6480 (S2) support level. Should on the flip side, the pair’s long positions be favored by the market, we could see the pair, clearly breaking the prementioned upward trendline, the 0.6565 (R1) resistance line and aim for the 0.6610 (R2) resistance level.
Other economic highlights, today and early tomorrow
Today during the European session, we get Germany’s factory order’s growth rate for June. In the American session, we get from the US the Jolts Job openings figure and the API weekly crude oil inventories figure. In tomorrow’s Asian session, besides RBNZ’s interest rate decision, the summary of opinions of BoJ’s last meeting is to be released. As for speakers please note that Philadelphia Fed President Harker and St. Louis Fed President Bullard are scheduled to speak today.
NZD/USD H4
Support: 0.6520 (S1), 0.6480 (S2), 0.6430 (S3)
Resistance: 0.6565 (R1), 0.6610 (R2), 0.6650 (R3)
USD/JPY H4
Support: 106.60 (S1), 106.00 (S2), 105.30 (S3)
Resistance: 107.20 (R1), 107.90 (R2), 108.50 (R3)
