Yen Strengthens, Considered Safe Currency, US Index Draws Support at 81.46 - 29.7.2013
The greenback early on the beginning of the week weakened further against the Japanese Yen, continuing previous week downside momentum, heading towards support at 97.00. Japanese Retail Sales improved in June by 1.6% compared to 0.8% in May but increased less than expected, while Japanese government plans an increase on sales-tax. BOJ governor Kuroda said at its speech earlier on Monday that the biggest risk factor for Japanese economic performance comes from possible downturn of the overseas economies, giving minor importance to sales-tax. Moreover, the Japanese Yen strengthened today as investors sought for a safe haven currency, Asian stock indices dropped, more specifically NIKKEI 225 lost 3.24% to 13,671.48.
Investors are mainly concerned for FED monetary statement on Wednesday regarding bond buying program. The FED is expected to clarify differences between interest rates policy and asset purchases policy, with interest rate expected to remain at record low for 2014. The US dollar index drew a support line at a new low around 81.46 and now is correcting back. In our view, the greenback could remain under pressure but oversold indicators and key support level would induce prices into sideways trading until FED statement.
On the European currency front, the EURUSD has been fluctuating in 1.3295/1.3253 tight range in the intraday while on the weekly chart approached top of the 1.3403/1.2758 sideways zone coupled by overbought oscillators signaling reversal of the recent uprise. ECB statement is also highly anticipated, speculation increased the previous week after European PMIs improved and then IMF commented that ECB may cut deposit rate. Euro may come under fundamental pressure on dovish ECB, going together with technical indications.