Morning Report: Sales Tax Speculation Supports USDJPY

Key Data Releases Today

1330GMT – CAD New Housing Price Index exp 1.7% v 1.5%
1330GMT – USD Continuing Claims exp 2349k v 2348k
1330GMT – USD Initial Jobless Claims 280k v 270k


Overview:

Speculation continues over the fate of the sales tax increases & snap elections in Japan. USDJPY jumped 30 pips to print a high of 115.88 on a press report report citing a ruling LDP party official, stating PM Abe appears to have made a decision to call snap elections, informing his party base to be prepared for December polls. The Japan cabinet has now been forced to deny such rumours twice in the past week, hence we will likely have to wait for Abe to return from his extended trip abroad next Monday before we get any official confirmation on either.

Elsewhere, AUDUSD dropped 50 pips to a low of 0.8672 following RBA’s Assistant Governor Kent injected a threat of currency intervention into his remarks. He reiterated the most
recent RBA position that AUD exchange rate is still too high relative to fundamentals, and that despite signs of improvement, labour market is subdued. Other comments were similarly dovish, noting non-mining investment recovery may not be as strong as those in the past, and that mining investment would fall further in the coming year, all leading up to the threat that “RBA has not ruled out intervention” as a policy option. Sensing overreaction to what essentially is common knowledge, AUDUSD later recovered back above 0.8700.

Later in the day, we get Canadian new housing price index & US jobless claims

EUR continues to test range lows.
CAD pull back continues to test support.
GBP strong rejection from range low retest.
JPY trades at highs on Abe Sales Tax postponement reports.
AUD testing range and trendline resistance.

Key Trades:

  • EURUSD: Bearish to Neutral – No Change – will set spec shorts on downside follow through (monitoring price action range retest from below)
  • USDCAD: Bullish – No Change (monitoring support test for upside follow through)
  • GBPUSD: Bearish – Revised (monitoring follow through on range rejection)
  • USDJPY: Bullish – No Change (trailing stops triggered)
  • AUDUSD: Bearish to Neutral – Revised – will set spec shorts on range and trendline rejection (monitoring range and trendline test)

Analysis:

EURUSD: Bearish to Neutral – No Change

  • Rejection candle at range retest from below, price continues to test range from below
  • Order Flow indicators recovering from very bearish levels, Linear Regression and Psychology test mid points
  • Monitoring potential follow through on rejection of range support now as potential resistance

EURO

USDCAD: Bullish – No Change

  • USD profit taking, price retreats from fresh 2014 highs, still testing support
  • Daily Order Flow indicators have crossed mid point to the downside
  • Monitoring trendline support and Order Flow indicators to signal bullish trend resumption
  • No follow through on test of support zone

loonie
GBPUSD: Bearish – Revised

  • Sharp rejection from range lows
  • Order Flow indicators test mid points, monitoring potential rejection of mid points for trend continuation
  • Will set new spec shorts on follow through from range low rejection

CABLE
USDJPY: Bullish – No Change

  • Price continues to be pressured to the upside driven by uncertainty regarding sales tax and elections 
  • Order Flow indicators testing midpoints
  • Monitoring support zones for potential trend resumption

yen
AUDUSD: Bearish to Neutral – No Change

  • Snap back into range monitoring price action for confirmation
  • Order Flow indicators testing midpoints
  • Monitoring price action on range mid point retest and trendline resistance

aussie

 

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