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Daily Pivots: (S1) 142.52; (P) 143.03; (R1) 143.86; More...

Despite today's retreat, intraday bias in USD/JPY stays on the upside with 141.99 minor support intact. Further rise should be seen to retest145.60 resistance first. Decisive break there will resume whole rally from 172.20. Next target is 61.8% projection of 129.62 to 145.06 from 137.22 at 146.76. On the downside, below 141.99 minor support will mix up the outlook and turn intraday bias neutral first.

In the bigger picture, overall price actions from 151.93 (2022 high) are views as a corrective pattern. Rise from 127.20 is seen as the second leg of the pattern and could still be in progress. But even in case of extended rise, strong resistance should be seen from 151.93 to limit upside. Meanwhile, break of 137.22 support should confirm the start of the third leg to 127.20 (2023 low) and below.

Daily Pivots: (S1) 0.8711; (P) 0.8745; (R1) 0.8784; More....

USD/CHF's rebound from 0.8551 is extending higher today and intraday bias stays on the upside. Rejection by 0.8818 support turned resistance will maintain near term bearishness. Further break of 0.8863 minor support will turn bias back to the downside for retesting 0.8551. Nevertheless, decisive break of 0.8818 will carry larger bullish implication, and target 0.9146 cluster resistance.

In the bigger picture, down trend from 1.0146 is seen as in progress as long as 0.8188 support turned resistance holds. Next target is 61.8% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.8317. However, sustained break of 0.8818 should indicate medium term bottoming, and bring stronger rise back to 0.9146 cluster resistance (38.2% retracement of 1.0146 to 0.8551 at 0.9160), even as a correction.

Dollar is making an effort to extend its near term rebound in early US session, bolstered by significantly stronger-than-expected ADP private job report. Concurrently, the greenback is finding support from the risk-off mood triggered by Fitch's unexpected downgrade of US sovereign rating, which sent global equities lower. However, Dollar's upside momentum seems far from being decisive, possibly an outcome of the typical summer trading slowdown. Yen, on the other hand, is having a slight recovery today, primarily due to exhaustion in its recent sell-off, though signs of a meaningful resurgence are yet to materialize.

On the European front, major currencies are showing mixed performance, with Euro holding up slightly better. Sterling seems to be in a dormant state, possibly in anticipation of tomorrow's BoE rate decision, while Swiss Franc clearly trails behind. Commodity currencies, however, continue to underperform, with the Canadian Dollar fairing slightly better than its peers. Aussie is facing headwinds from both the risk-off environment and reversal in Copper prices.

USD/CAD would be an interesting one to watch, even though it's a bit early for a mention now, considering that both US and Canada will publish job data on Friday. Technically speaking, today's break above 55 D EMA (now at 1.3292) is a near term bullish sign. Extended rally through 1.3386 resistance could mark the completion of whole corrective fall from 1.3976 (2022 high), with three waves down to 1.3091. That would set up a short-to-medium term rally back towards this high. Let's see if the data could trigger this scenario.

In Europe, at the time of writing, FTSE is down -0.95%. DAX is down -0.94%. CAC is down -0.56%. Germany 10-year yield is down -0.0434 at 2.515. Earlier in Asia, Nikkei fell -2.30%. Hong Kong HSI fell -2.47%. China Shanghai SSE fell -0.89%. Singapore Strait Times fell -1.45%. Japan 10-year JGB yield jumped 0.0338 to 0.628.

US ADP jobs rose 324k, slowdown in pay growth without broad-based job loss

US ADP private employment grew 324k in July, well above expectation of 195k. By sector, goods-producing jobs rose 21k while service-providing jobs rose 303k. By establishment size, small companies added 237k jobs, medium added 138k, large lost -67k. Job-stayers annual pay growth fell to 6.2% yoy, slowest pace since November. Job-changers annual pay growth also fell to 10.2% yoy.

Nela Richardson Chief Economist, ADP, said: "The economy is doing better than expected and a healthy labor market continues to support household spending. We continue to see a slowdown in pay growth without broad-based job loss."

BoJ Uchida: Monetary easing to continue to nurture firms' changing pricing strategies

BoJ Deputy Governor Shinichi Uchida highlighted in a speech today an emerging trend in firms' pricing strategies, noting that "firms are developing more forward-looking strategies for setting prices." According to Uchida, these changes "might be the chance to finally change Japan's economy." Hence, he emphasized BoJ will "patiently continue with monetary easing to carefully nurture these signs."

Uchida was explicit in outlining the Bank's monetary policy stances. Firstly, he ruled out near-term adjustments to short-term interest rate, currently at -0.10%, stating "there is still a long way to go before such decisions are made."

Secondly, BoJ will "maintain the current framework" until sustainable and stable achievement of 2% inflation target "come in sight".

Thirdly, Uchida affirmed the ongoing yield curve control under the present policy framework, aiming to balance its benefits and drawbacks, especially in relation to financial intermediation and the market.

Despite the high economic and price outlook uncertainty, Uchida stated the recent yield curve control modification, allowing the 10-year JGB yield to rise to up to 1%, is aimed at sustaining the ultra-loose policy. "Needless to say, we do not have an exit from monetary easing in mind," he emphasized.

New Zealand employment up 1% in Q2, wage inflation unchanged at 4.3% yoy

New Zealand reported a better-than-expected employment growth of 1.0% in the second quarter of 2023, surpassing market expectations of a 0.6% rise. On the other hand, unemployment rate slightly increased from 3.4% to 3.6%, marginally above the anticipated 3.5%.

The data released showed that employment rate rose from 69.6% to 69.8%, and the participation rate increased from 72.0% to 72.4%. These are the highest rates recorded since the series began in 1986.

In terms of wage growth, all sector wage inflation climbed by 1.1% on a quarterly basis, resulting in an annual increase of 4.3%. "Annual wage costs continued to increase at historically high rates this quarter, equal to the 4.3 percent annual increase last quarter," said Bryan Downes, business prices delivery manager.

Downes noted that the most significant contribution to the Labour Cost Index for the June 2023 quarter came from retail trade and accommodation industry. This sector witnessed 1.5% increase in wages on a quarterly basis, following 0.7% rise in the previous quarter. The wage growth in this industry was primarily driven by rise in minimum wage, thereby pushing up overall wage growth during the quarter.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.8711; (P) 0.8745; (R1) 0.8784; More....

USD/CHF's rebound from 0.8551 is extending higher today and intraday bias stays on the upside. Rejection by 0.8818 support turned resistance will maintain near term bearishness. Further break of 0.8863 minor support will turn bias back to the downside for retesting 0.8551. Nevertheless, decisive break of 0.8818 will carry larger bullish implication, and target 0.9146 cluster resistance.

In the bigger picture, down trend from 1.0146 is seen as in progress as long as 0.8188 support turned resistance holds. Next target is 61.8% retracement of 0.7065 (2011 low) to 1.0342 (2016 high) at 0.8317. However, sustained break of 0.8818 should indicate medium term bottoming, and bring stronger rise back to 0.9146 cluster resistance (38.2% retracement of 1.0146 to 0.8551 at 0.9160), even as a correction.

Economic Indicators Update

US ADP private employment grew 324k in July, well above expectation of 195k. By sector, goods-producing jobs rose 21k while service-providing jobs rose 303k. By establishment size, small companies added 237k jobs, medium added 138k, large lost -67k.

Job-stayers annual pay growth fell to 6.2% yoy, slowest pace since November. Job-changers annual pay growth also fell to 10.2% yoy.

Nela Richardson Chief Economist, ADP, said: "The economy is doing better than expected and a healthy labor market continues to support household spending. We continue to see a slowdown in pay growth without broad-based job loss."

Full US ADP job report here.

• BoJ says no plans to exit easy monetary policy
• US to release ADP Employment report on Wednesday
• USD/JPY rebounds

The Japanese yen has reversed a nasty three-day slide on Wednesday. In the European session, USD/JPY is trading at 142.75, down 0.40%.

BoJ says monetary easing to continue

The BoJ triggered some turmoil in the currency markets last week when it unexpectedly eased its yield curve control. This raised speculation that the move marked a shift in the BoJ’s ultra-loose monetary policy, perhaps even the beginning of the end of the policy.  The yen has taken a plunge, falling over 400 basis points against the dollar over the past several days.

The BoJ has moved quickly to dampen speculation of an exit from its policy. On Wednesday, Deputy Governor Ichida said that the BoJ’s more flexible threshold for 10-year bond yields was only a modification to sustain its ultra-loose monetary position. Ichida added that the BoJ does not have “an exit from monetary easing in mind”. These comments were a repeat of BoJ Governor Ueda’s comments on Friday that the tweak to the YCC was not a step toward normalization.

Ichida’s comments had the desired effect and provided a boost to the Japanese yen on Wednesday. But for how long? Investors aren’t at all convinced that the central bank won’t shift policy, as the BoJ will often say one thing and then do the opposite in order to catch the markets by surprise. This may enable the BoJ to stay one step ahead of the speculators but it certainly does not enhance the Bank’s credibility. I would not be surprised to see the yen renew its downswing in the short term.

In the US, investors will be keeping a look at today’s ADP Employment report. The report made headlines last week with a massive gain of 497,000, fuelling speculation that nonfarm payrolls might follow suit with a banner release. In the end, nonfarm payrolls fell significantly, as expected, a reminder that ADP is not all that reliable as a precursor of nonfarm payrolls.

USD/JPY Technical

• USD/JPY is testing support at 142.63. Next is support at 141.47
• There is resistance at 143.86 and 144.37

EURJPY is flirting with its 15-year high of 157.94 again that it registered in July, thanks to strong buying interest over the past three days.

The pair bounced up with strong momentum following the nosedive to a six-week low of 151.39 last Friday, forming a bullish channel in the medium-term picture. More fuel is needed to continue the rally above 158.00, but the negative trend in the RSI and MACD cast doubt on a major change happening soon. Note that the stochastic oscillator is nearing its 80 overbought level too.

If the uptrend resumes above 158.00, the price could mark a new higher high somewhere between 160.00 and 161.35, where the two resistance lines from January could cap the price. Another successful battle there could lift the price towards the 163.00 barrier last seen in August 2008, while a faster increase could target the limits around 165.00.

Looking for support levels, the 20-day simple moving average (SMA) has been limiting both upside and downside movements occasionally in the past and could immediately come into consideration at 155.85 if sellers take control. The space between the 50-day SMA and the 153.00 round level might delay a test near the channel’s lower boundary seen at 152.00. Even lower, the pair might seek shelter within the 150.00-149.80 constraining zone.

In brief, despite the quick recovery from last week’s plunge, EURJPY has not eliminated downside risks yet. An obvious extension above 158.00 is essential for a continuation towards 160.00.

Daily Pivots: (S1) 1.6432; (P) 1.6525; (R1) 1.6699; More...

Intraday bias in EUR/AUD is back on the upside with firm break of 1.6601 resistance. Further rally should be seen to 1.6785 high. Decisive break there will resume larger up trend to 1.7377 projection level next. On the downside, break of 1.6577 minor support will delay the bullish case and turn intraday bias neutral first.

In the bigger picture, with 38.2% retracement of 1.4281 to 1.6785 at 1.5828 intact, rally from 1.4281 is still in progress. Firm break of 1.6785 will confirm rise resumption. Next target is 100% projection of 1.5254 to 1.6785 from 1.5846 at 1.7377. On the other hand, rejection by 1.6785 will extend the corrective pattern with another fall leg. But outlook will stay bullish as long as 1.5828 holds.

Daily Pivots: (S1) 0.8563; (P) 0.8585; (R1) 0.8619; More...

Outlook in EUR/GBP is unchanged and intraday bias remains neutral. On the downside, below 0.8543 will target a test on 0.8502 low. Decisive break there will resume larger decline from 0.8977. On the upside, above 0.8618 minor resistance will turn bias back to the upside for 0.8700, and possibly further to 0.8717 key support turned resistance.

In the bigger picture, the down trend from 0.9267 (2022 high) is seen as part of the long term range pattern from 0.9499 (2020 high). Firm break of 0.8717 support turned resistance will argue that it has completed with three waves down to 0.8502. Further break of 0.8977 will bring retest of 0.9267 high. Nevertheless, rejection by 0.8717, followed by break of 0.8502 will resume the decline towards 0.8201 (2022 low).

Daily Pivots: (S1) 156.72; (P) 157.11; (R1) 157.82; More....

Intraday bias in EUR/JPY is turned neutral with current retreat but outlook is unchanged. Decisive break of 157.99/158.03 will resume larger up trend to 162.82 projection level next. However, break of 155.10 will extend the corrective pattern from 157.99 with another falling leg instead.

In the bigger picture, as long as 151.60 resistance turned support holds, rise from 114.42 (2020 low) is in progress. On resumption, next target is 100% projection of 124.37 to 148.38 from 138.81 at 162.82. Nevertheless, sustained break of 151.60 will argue that larger correction is already underway. Deeper decline would be seen to 55 W EMA (now at 145.56).

Daily Pivots: (S1) 182.73; (P) 182.99; (R1) 183.39; More...

Intraday bias in GBP/JPY is turned neutral with current retreat. Outlook is unchanged that corrective pattern from 183.99 has completed with three waves down to 176.29. Above 183.23 will target 183.99 resistance first. Decisive break there will resume larger up trend. However, break of 180.85 will turn bias to the downside to extend the corrective pattern from 183.99 with another falling leg.

In the bigger picture, as long as 172.11 resistance turned support holds, up trend from 123.94 (2020 low) is expected to continue through 183.99 at a later stage, towards 195.86 (2015 high). Nevertheless, firm break of 172.11 will argue that larger correction is already underway.