Daily Report: Dollar and Yen Back Under Mild Pressure, Kiwi Recovers Mildly

Dollar and yen are back under mild pressure as European stocks open slightly higher on positive earnings from Siemens AG and BASF SE. GBP/USD leads the way and breaks yesterday high, rises to as high as 1.5651 so far while EUR/USD continue to press 1.305 level. Yen crosses, as well as AUD/USD and NZD/USD, are generally lifted off from yesterday's low. There is no change in risk appetite trend yet and the dollar and yen would likely continue to remain soft for a while.

The RBNZ raised the OCR by +25 bps to 3% in June. However, the market was disappointed as the central bank explicitly said that 'the pace and extent of further OCR increases is likely to be more moderate than was projected in the June statement'. The reference is inline with our view that the RBNZ will slow the tightening path later in the year. More in RBNZ Raised OCR To 3%, Signaled Slowdown In Pace Of Tightening.

Fed's beige Book covering the period spanning mid-June through late-July reported that 'economic activity has continued to increase, on balance, since the previous survey' but economies in 2 (Cleveland and Kansas City) of the Fed's 12 districts 'held steady' while 2 (Atlanta and Chicago) showed slowdown in the pace of expansion. The overall outlook is less optimistic than June's report as the Fed described the economy in all 12 districts as 'continued to improve' at 'modest' pace. More in July's Beige Book Shows Slowdown in Growth.

On the data front, New Zealand trade surplus narrowed more than expected to NZD 276m in June. Japan retail sales rose 3.2% yoy in June. German employment report and EUrozone confidence indicators will be released in European session. Canadian IPPI and RMPI as well as US initially jobless claims will be the main focus in US session.

NZD/JPY's rebound was limited at 64.65 earlier this week and weakened sharply since then. There is no change in our view that price actions from 58.64 are consolidations to medium term fall from 69.32. It's looking likely that such consolidation is developing into a triangle pattern. We'd continue avoid trading the choppy price actions inside the converging range and prefer to sell NZD/JPY near to upside end of the range near to 65.28 in anticipation to a downside breakout later in August.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 135.65; (P) 136.59; (R1) 137.33; More

With 4 hours MACD crossed below signal line, intraday bias in GBP/JPY is turned neutral and some sideway trading might be seen first. Nevertheless, downside should be contained by 134.37 support and bring another rise. Whole medium term rally from 126.73 is expected to continue further and above 137.52 will target 61.8% retracement of 145.94 to 126.73 at 138.60 and above.

In the bigger picture, with 145.94 resistance intact, we'd still favor that fall from 163.05 is not finished yet. Break of 130.82 support will indicate that corrective rebound from 126.73 is completed and the fall from 163.05 is resuming for a retest of 118.18 low. Break there will confirm that whole down trend from 2007 high of 251.09 has resumed for 61.8% projection of 215.87 to 118.81 from 163.05 at 103.06 next, which is close to 100 psychological level. However, break of 145.94 will indicate that fall from 163.05 is finished. Also, this will suggest that such fall is merely the second wave of the whole consolidation pattern from 118.81 and will bring another rise to 163.05 and above before resuming the longer term down trend.

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