Mid-Day Report: Range Trading Continues in Forex Markets

Markets continue to stay in established range in early US session. Dollar and yen strengthens earlier today on falling European stocks but are both help below this week's high against other major currencies. Little reactions are seen to stronger than expected Trade balance and import price from US while Canadian dollar's weakness on crude oil is somewhat offset by better than expected employment report. Though, Sterling pares much of yesterday's sharp gain after release of PPI report.

Data from US saw trade deficit unexpectedly shrank to -26b in May. Import price index rose much more than expected by 3.2% mom in June. Canadian unemployment rate rose to 11 year high of 8.6% in June but was better than consensus of 8.7%. Also, contraction in the Canadian job market was less severe than expected by -7.4k only. Trade deficit, though, widened to -1.4B in May in Canada while new housing price index dropped less than expected by -0.1% mom.

UK PPI input rose more than expected by 1.5% mom in Jun. However, PPI output unexpectedly dropped -0.2% mom. On annual basis, PPI input dropped -11.0% while output PPI dropped -1.2%. German WPI rose much more than expected by 0.9% mom in June. Japan domestic CGPI has record drop of -6.6% yoy in June.

Technically speaking, dollar is still bounded in recently established range in spite of today's strong rebound. After all, there is no change in the view that the index is consolidating rise from 78.33 and hence, even in case of another fall, downside is expected to be contained by 79.19. ABove 80.89 will be the first alert that dollar index is resuming rally to 82.63 key cluster resistance.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 92.37; (P) 92.99; (R1) 93.59; More.

USD/JPY's break of 92.37 minor support suggests that recovery from 91.79 has completed. Intraday bias is flipped back to the downside and break of 91.79 will confirm decline resumption for 161.8% projection of 98.87 to 94.87 from 96.96 at 90.48 next. On the upside, above 92.91 minor resistance will suggest that consolidation from 91.79 is still in progress with risk of another rise. Nevertheless, upside is still expected to be limited below 94,87 to complete the consolidation.

In the bigger picture, the strong break of 93.53/84 support revived the bearish case that USD/JPY has completed a head and shoulder top (ls: 99.67, h: 101.43, rs: 98.87). More importantly, note that USD/JPY is still staying below 55 weeks EMA (now at 98.96), 38.2% retracement of 124.13 to 87.12 at 101.25, and long term falling trend line resistance (now at 100.05) too. In other words, whole down trend from 124.13 is still in progress. Hence, we'd look forward to at least a test of 87.12 low, with much odds of breaking through to resume the down trend. On the upside, a break above 96.96 is now needed to invalidate this case.

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