NEWS / Indicators

Yen hits 8 months low vs Dollar on possible second nuclear test

By Jean-Claude Braha - ACM Senior Trader Yesterdays News and Events: Already under pressure after Pyongyang said on Monday that it had successfully carried out an underground nuclear test, the Yen slipped further and UsdJpy hit eight-month high early Tuesday on talk of a possible second nuclear test by North Korea. However, traders did not expect further impact on the market and it recovered part of it. UsdJpy was up as much as 119.35 from 118.83 yesterday low and 117.63 Friday low. The EurJpy was nearly flat at 150 after rising to 150.22 this morning and 150.30 yesterday. The Yen recovered small part of today loss despite data showing core Japanese machinery orders rose 6.7% in August. Analysts said recent data didn??™t change expectations the Bank of Japan would stick to a very gradual path of raising interest rates from the current 0.25%. The Dollar found support as Japanese traders could trade on a sharp upward revision in past US Payrolls growth. A slowing in US economy and expectations that inflation pressures could moderate were behind the Fed 5.25% rate unchanged in the last two months. Latest outcome softened the expectations of rate cut next year. Todays Key Issues: French August Trade Balance reached ?‚¬ -3.5B after a revised deficit of ?‚¬ -3.4B in July. The consensus had expected a deficit of ?‚¬ -3B. GB August Visible Trade Balance due at 8:30 GMT is expected -6.2B vs -6.34B. GB September BRC Retail Sales Monitor is due at 10:00 GMT. CAD September Canadian Housing Starts due at 12:15 GMT is expected 218K vs 214K. Only minor US announcement, August Wholesale Inventories due at 14:00 GMT is expected 0.7% vs 0.8%. The Risk Today: EURUSD could show more weakness following the recent break of former support at 1.2630. Clearance of 1.2570 (76.4% retracement of the 1.2456 to 1.2941) is expected and will pave the way for a move towards 1.2450 (July low). The immediate outlook is negative beneath Friday's 1.2710 high, but it would take a recovery over 1.2770, the peak from Oct 3 to relieve the broader bearish tone. USDCHF gains are likely to extend following last Friday's rally that saw 1.2625 former resistance cleared. We expect further upside over the coming sessions towards 1.2736 (61.8% retracement of the 1.3241 to 1.1919), with scope for 1.2930 (76.4% retracement thereafter). Near-term support resides at Friday's 1.2490 low, but the up-trend remains dominant above 1.2400 psychological level. GBPUSD is heavy short-term below 1.8900 (61.8% retracement of the 1.8633 to 1.9076), but extended downside beyond 1.8601 is needed to trigger a move outside the range towards 1.8490 (61.8% retracement of the 1.8090 to 1.9146). USDJPY With momentum conditions also providing a positive backdrop, the target for the USD now sits at 119.40 with scope too for a test of the psychological 120.00 level. The most significant recent technical development is the break last week of the key multi-year trend-line resistance at 118.50 originating from 1998. Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.2880 K 1.9144 T 121.40 T 1.2800 P 1.2710 S 1.9075 M 120.74 M 1.2736 S 1.2630 P 1.8901 S 119.40 S 1.2625 M 1.2587 1.8642 119.27 1.2625 1.2570 S 1.8601 K 118.50 P 1.2490 M 1.2560 K 1.8490 S 117.32 M 1.2400 K 1.2450 T 1.8400 T 116.06 T 1.2287 S S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot