Daily Report: Dollar Stabilized from Post FOMC Selloff, EUR/JPY at Record High

Dollar recovers against majors today as markets stabilized from the post FOMC sell off yesterday. While the accompanying statement did sound concerned on inflation, with one voter, Fisher, voted for a hike, dollar bulls were clearly note satisfied with the lack of urgency for hike shown in the minutes. Indeed, odds for a Sep hike as implied by interest rate futures were sharply down from over 90% to below 40% after the announcement. While dollar remains generally weak and edged lower against Euro and Aussie, note that it's still in range against Swissy, Sterling and the yen. The greenback is still lacking a clear direction.

Nevertheless, the focus seems to be on the Japanese yen now, with EUR/JPY finally taking out all time high of 168.93 to 169.46 and is set to take on 170 psychological resistance. GBP/JPY is also pressing key medium term resistance of 213.48. Markets are still focusing on the possibility of widening rate gap, in particular between ECB and BoJ.

Taking about Euro, Germany import prices growth accelerated to 2.4% mom in May, an 18 years high, yoy rate also accelerated sharply to 7.9% versus expectation of 6.9%. M3 money supply growth will be watched and is expected to slow slightly from 10.6% yoy to 10.4% yoy in May.

In US session, Q1 GDP finally print is expected to be revised slightly higher to 1.0% annualized rate. PCE and core PCE are expected to be unchanged at 3.5% and 2.1% respectively. Joblessness claim is expected to remain high at 375k. Existing home sales is expected to show slight recovery by 1.2% to 4.95m annualized rate in May.

More on FOMC:

• FOMC: Neutral, With Rising Inflation Concerns
• FOMC Statement Largely As Expected - Inflation Wording Strengthened
• FOMC Meeting: Speak Loudly And Carry A Small Stick
• FOMC Leaves the Fed Funds Rate Unchanged at 2%, With an Upside Bias
• FOMC Statement Balanced, But Tilts Towards Inflation Concerns, Economists Say
• Fed Leaves Rates Unchanged, Fails to Surprise the Market
• Comparative Analysis of Current vs. April FOMC Statements
• FOMC Holds Target Rate at 2.00%, Cites Uncertainty in Inflation Outlook
• (FED) FOMC Statement June 25, 2008

EUR/JPY Daily Outlook

Daily Pivots: (S1) 167.95; (P) 168.55; (R1) 169.47; More.

EUR/JPY finally takes out 168.93 key medium term resistance and reached as high as 169.46 so far. At this point, intraday bias remains on the upside as long as 168.39 minor support holds. Further rally should be seen to test 170 psychological resistance. As discussed before, sustained trading above 168.39 will confirm that long term up trend has resumed. Next short term target will be 61.8% projection of 130.60 to 168.93 from 151.71 at 175.40 first. On the downside, below 168.39 will turn intraday outlook neutral first but pull back should be contained by 165.63 support and bring rally resumption.

In the bigger picture, EUR/JPY's break of 168.93 key medium term resistance indicates that long term up trend from 88.97 (00 low) has resumed. Sustained trading above this level will confirm this case and set the stage for further rise to next important cluster resistance at 188.22 (50% retracement of 285.56 (79 high) to 88.97 (00 low) at 187.26). On the downside, break of 158.60 support is needed to indicate that rise from 151.71 has completed. Otherwise, further rally is still expected even in case of a deep pull back.

Forex News Digest

• German Import Prices See Strongest Monthly Rise In Almost 18 Years
• The Day Ahead U.S. and Canada: U.S. GDP, Existing Home Sales & Jobless Claims
• The Day Ahead Europe and U.K.: German Import Prices & State CPI, Euro Zone M3
• U.S. Preview: Existing Home Sales Expected to Bump Up to 4.95 Million in May
• U.S. Preview: Jobless Claims Expected at 375k for Week Ending June 21
• Closing Market Recap: Murky Fed Statement Helps Treasuries, Hurts U.S. Dollar
• Yen Falls to Record Low Against Euro as Fed Reduces Currency Volatility
• Australian, New Zealand Dollars Gain on Reduced Bets of Fed Rate Increase
• Home Resales in U.S. Probably Climbed in May as Lower Prices Lured Buyers
• Fed Sounds Inflation Alarm, Takes `Baby Step' Toward Raising Interest Rate
• Euro Gain May Stall at $1.5726 on Technical Charts, Societe Generale Says
• U.K. Pound Declines for Third Day Against Euro, Drops Versus U.S. Dollar

More Forex News

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