ASIA session review: yen goes higher

Data released (actual, consensus, previous):                           

05:00    Japan   Leading Economic Index (May)   110.7        107.7        

06:00    Germany  Producer Price Index (MoM) (Jun)   0.0%    0.0%    -0.3%        

06:00    Germany   Producer Price Index (YoY) (Jun)    0.6%    0.6%    0.2%    

The yen strengthened, paring weekly declines against most major peers, as Asian stocks declined before upper-house elections of Japan’s parliament on July 21.

The extra yield that investors receive from holding U.S. Treasuries instead of Japan’s government bonds fell from a two-year high, reducing the appeal of the dollar.

The Bank of Japan doubled monthly purchases of JGBs to more than 7 trillion yen in April after Prime Minister Shinzo Abe urged the central bank to take steps to overcome deflation.

Abe’s Liberal Democratic Party and its coalition partner New Komeito are on track to win more than 65 of the 121 upper house seats being contested, according to a poll published in the Nikkei newspaper on July 17. A victory in the vote will give the parties control of both chambers of parliament, strengthening the prime minister’s ability to carry out a three-pronged plan of monetary easing, fiscal stimulus and deregulation known as Abenomics.

A positive outcome for Abe will help him push through further easing that contrasts with “a stronger U.S. economy and tapering of their quantitative policy measures.

EURO:

The euro keeps its positions against the main rivals.

EUR/USD consolidates above $1.3100 with next support comes at $1.2966 (low Jul.11) ahead of $1.2949 (high Jul.10) and finally $1.2755 (low Jul.1). Initial resistance comes at $1.3180 with a  break above $1.3208 (high Jul 11) would expose $1.3255 (high Jun 21).

POUND:

Positive data from UK continue to support the sterling.

GBP/USD remains positive. Minor resistance comes at yesterday’s high on $1.5265, printed following the BOE minutes. Further resistance is around $1.5300.

Initial support comes at $1.5080 (Jul 17 lows), below - at $1.5030 (Jul 15 lows) and $1.4780 (Feb 28’2010 lows). 

YEN:

The yen weakened for a second day on bets Group of 20 finance ministers and central bankers meeting this week will endorse the Bank of Japan’s monetary easing that aims to stoke 2% inflation.

“We see the yen weakening further,” said Kengo Suzuki, the chief currency strategist at Mizuho Securities Co

The BOJ doubled monthly bond purchases to more than 7 trillion yen ($70 billion) in April, after Prime Minister Shinzo Abe urged the central bank to take steps to overcome deflation. Polls have shown Abe’s Liberal Democratic Party and coalition partners are likely to win a majority in the upper house election this weekend, ending a split parliament.

Japan leading economic Index in May came at 110.7 vs 107.7.

USD/JPY holds above Y100.00. Initial resistance comes at Y100.50 (Jul 15 highs), then - at Y101.00 and Y101.50 (Jul 7 highs). Support is around channel line from Jun 13 at Y99.30, below support comes at Y98.20 (Jul 11 lows).

DATA AHEAD:

Canada   Consumer Price Index as well as  Bank of Canada Consumer Price Index Core are due at     12:30 GMT.

Source of information>>

More information>>