USD/JPY – 142.17
Despite dollar’s resumption of uptrend to a fresh 24-year peak of 144.98 (Wednesday), subsequent retreat to 143.33, then intra-day selloff below there to 142.47 on active yen buying due to warning by BOJ’s Kuroda on rapid yen rise signals a temporary top is made and may head towards 141.85.
On the upside, only a daily close above 143.33 would signal 1st leg of correction over and head back to 143.72.
Data to be released on Friday
France industrial output, U.K. consumer inflation.
Canada capacity utilization, employment change, unemployment rate, U.S. wholesale inventories and wholesale sales.
JPY hits 20-year low
(Giles Coghlan LLB, Lth, MA – HYCM)
This week was busy with the European Central Bank, Reserve Bank of Australia, and Bank of Canada all meeting. One interesting point to note was a comment from RBA’s Governor Lowe who introduced the topic of when central banks slow the path of rate hikes down. The UK saw a new PM in the form of Liz Truss and she announced a huge energy package on Thursday for the UK in order to tackle the recent surge in UK energy prices. JPY weakness was marked this week, at a twenty-year low, and next week US inflation on Tuesday will be the next clue as to how fast the Fed will hike US interest rates. Busy times.
Other key events from the past week
- EUR: ECB rate decision, Sep 08: The ECB meeting was as expected and a key point to focus on going forward is whether or not the eurozone falls into a recession. This is the downside case for the eurozone, but not the ECB’s base case.
- AUD: RBA rate decision, Sep 06: The RBA met this week and hiked by 50bps as expected. However, one key point to note is that the following day Governor Lowe mentioned that a case for slower rate hikes becomes stronger as the level of the cash rate increases. Could this send the AUDNZD lower?
- JPY: MoF, BoJ, & FSA meet Sep 08: The MOF, BoJ, and FSA have all met on Thursday this week, but they have done nothing, which is unsurprising as who wants to fight USD strength right now? However, traders must watch for possible JPY intervention.
Key events for the coming week
- USD: Inflation focus Sep 13: The Fed is keenly focused on inflation and if the core inflation surprises to the upside this will keep the pressure on the Fed to hike rates quickly. A big miss in the data could, however, weaken the USD.
- AUDJPY in focus: Can the seasonal strength for AUDJPY play out?
- GBP: Double-digit inflation, Sep 14: At the last BoE meeting the bank projected that inflation would rise above 13% this year. However, with the new energy relief coming from the new UK PM Truss, will that help alleviate inflation concerns?