FX Daily

Written by RetailFX Dealing Desk

 Elevated risk appetite pushes the Greenback lower against most majors. As the earning season approaches investors are more and more willing to bet on a recovery. With volatility down even the conservative investors start considering a dip in the choppy waters. The Greenback is down around -1.15% against the Euro and -1.21% against the Pound for the last two weeks. However the picture is still not clear for the greenback as bets of a recovery could be premature and yet to be justified. The stream of data and economic sentiment this week might shed some more light on the health of the world economy and might point either to a greenback stability currencies or more Dollar weakness with a flee to high yielding currencies and commodities.

 In the UK data surprised for the Worse with GDP contracting -4.9% YoY against preliminary estimates of -4.3% contraction YoY, the data which comes after disappointing UK credit data a day before might question the UK recovery story which has been the engine behind the latest Sterling strong appreciation against the Dollar and the Euro. As the troubles for the UK economy might not be over yet the Sterling which is trading around 1.66 against the dollar and 0.85 against the Euro could be at risk of profit taking as the doubt over the UK recovery looms.

 In Japan indicators continue to show rapid economic contraction with unemployment expanding to a five year peak of 5.2% ,housing starts falling -30.8% YoY and industrial production falling   -29.5% YoY. However not all is grim for the land of the rising sun. The Japanese economy which has suffered strongly from the claps in exports and is long known for having deflationary pressures as the country has a high saving rate is showing some signs of recovery in consumer confidence. House hold spending up surprisingly 0.3% against an expected -1.5% contraction which might point out that maybe, just maybe the large stimulus in the Japanese economy is starting to kick in and stability is close for the world’s second largest economy.

Technical analysis

USD/JPY

After topping out at the 101 level the pair has been trading flat and moving slightly lower towards the 94 area. The pair is moving steadily towards a retest of the 93.6 resistance which has provided strong support for the pair since the end of April and has kept the trade in the pair rather flat. A break of the 93.6 support could ignite profit taking which might drive the pair down toward the 90-91 area. However attention should be given to market volatility as the pair tends to have bullish swings when volatility is down substantially.

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