Dollar Selloff Resumes after PPI Miss
Dollar selloff resumes in early US session after lower than expected PPI reading. Aussie and Kiwi are strong as supported by risk-on sentiments but Canadian is lagging behind. Yen is also firm, together with Swiss Franc, thanks to falling yields. Euro and Sterling continue to be mixed. In other markets, Gold is struggling to take out 1800 handle decisively, but bias stays on the upside. WTI crude oil recovering, with relatively weak momentum.
Technically, GBP/CHF’s break of 1.1525 support this week suggests that down trend from 1.3070 is resuming. Next target is 161.8% projection of 1.3070 to 1.2134 from 1.2598 at 1.1084. The question is when EUR/CHF will follow and break through 0.9697 low.
In Europe, at the time of writing, FTSE is down -0.51%. DAX is up 0.16%. CAC is down -0.02%. Germany 10-year yield is down -0.0001 at 0.890. Earlier in Asia, Japan was on holiday. Hong Kong HSI rose 2.40%. China Shanghai SSE rose 1.60%. Singapore Strait Times rose 0.48%.
US PPI down -0.5% mom in Jul, slowed to 9.8% yoy
US PPI for final demand dropped -0.5% mom in July, versus expectation of 0.2% mom rise. The decrease is attributable to -1.8% mom decline in goods while services rose 0.1% mom. For the 12-months, PPI rose 9.8% yoy, slowed from June’s 11.3% yoy.
Prices for final demand less foods, energy and trade services rose 0.2% mom. For the 12 months, PPI less foods, energy and trade services rose 5.8% yoy.
US initial jobless claims rose 14k to 262k
US initial jobless claims rose 14k to 262k in the week ending August 6, slightly below expectation of 265k. Four-week moving average of initial claims rose 4.5k to 252k.
Continuing claims rose 8k to 1428k in the week ending July 30. Four-week moving average of continuing claims rose 24k to 1399k.
Fed Daly: 50bps hike in Sep is her baseline
In an FT interview, San Francisco Fed President Mary Daly said, “there’s good news on the month-to-month data that consumers and business are getting some relief, but inflation remains far too high and not near our price stability goal,”
“This is why we don’t want to declare victory on inflation coming down,” she said. “We’re not near done yet.”
She reiterated her view that rise should rise to just under 3.5% by the end of the year. And her baseline for September FOMC meeting is a 50bps hike.
“There is a lot of uncertainty, so leaping ahead with great confidence that [a 0.75 percentage point rate rise] is what we need and being prescriptive would not be optimal policy,” she said.
NZD/USD completed head and shoulder bottom, targets 0.657/9
NZD/USD surges to as high as 0.6452 so far today and it’s still in upside acceleration mode. This week’s break of 0.6351 resistance completes a head and shoulder bottom pattern (ls: 0.6195, h: 0.6059, rs: 0.6211). The strong break of 55 day EMA, and bullish convergence condition in daily MACD are both bullish signs too.
Further rise is now expected as long as 0.6351 resistance turned support holds. Next target is 0.6575 cluster resistance zone (38.2% retracement of 0.7463 to 0.6059 at 0.6595). This is the major resistance zone for NZD/USD to overcome. Decisive break there will raise the chance of medium term bullish reversal. Meanwhile, rejection by 0.6575/95 will maintain medium term bearishness.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 131.51; (P) 133.41; (R1) 134.79; More…
USD/JPY’s recovery from 130.38 should have completed at 135.57 and fall from 139.37 is resume to resume. Intraday bias is back on the downside for 130.38 support first. Break there will target 100% projection of 139.37 to 130.38 from 135.57 at 126.58. As such decline is seen as a corrective move, strong support should be seen from 126.35 to contain downside. But for now, risk will remain on the downside as long as 135.57 resistance holds, in case of recovery.
In the bigger picture, fall from 139.37 medium term top is seen as correcting whole up trend from 101.18 (2020 low). While deeper decline cannot be ruled out, outlook will stays bullish as long as 55 week EMA (now at 121.84) holds. Long term up trend is expected to resume through 139.37 at a later stage, after the correction finishes.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:01 | GBP | RICS Housing Price Balance Jul | 63% | 60% | 65% | |
| 01:00 | AUD | Consumer Inflation Expectations Aug | 5.90% | 6.30% | ||
| 12:30 | USD | PPI M/M Jul | -0.50% | 0.20% | 1.10% | |
| 12:30 | USD | PPI Y/Y Jul | 9.80% | 10.40% | 11.30% | |
| 12:30 | USD | PPI Core M/M Jul | 0.20% | 0.40% | 0.40% | |
| 12:30 | USD | PPI Core Y/Y Jul | 7.60% | 7.60% | 8.20% | |
| 12:30 | USD | Initial Jobless Claims (Aug 5) | 262K | 265K | 260K | 248K |
| 14:30 | USD | Natural Gas Storage | 40B | 41B |