Wednesday, 16 August 2017

What’s next? – USDJPY 16.08.17

Posted by Valentine at 12:01 Labels:

USDJPY

The dollar/yen was up 0.17 percent as of 08:15 GMT on Wednesday to trade at 110.85, amid a wider recovery of the dollar following North Korea’s suspension of a strike on Guam.

Local media reported that Kim Jong-un has ordered to suspend the launch of six ballistic missiles on the western Pacific island until further notice. Pyongyang said last week it was “carefully examining” an attack on Guam following Trump’s “fire and fury” comments.

The US dollar index, which gauges the greenback against a basket of six major currencies, was trading at 93.88 by the time of this writing, up 0.13 percent.

The dollar was also supported by upbeat economic data from the United States. The Commerce Department said on Tuesday retail sales jumped 0.6 percent in July, above an initially forecasted 0.4 percent build. The export and import price indexes showed a 0.4 percent and 0.1 percent growth respectively, against a 0.2 percent and 0.1 percent seen.

In other news, the New York State manufacturing index, which moved to 25.20, comfortably above a modest 10.00 expectation. Business inventories were up by 0.5 percent.

This pair is particularly affected by risk-on/risk-off sentiment. With tensions in the Korean peninsula easing, we can expect traders to focus entirely on the release of FOMC minutes.

On the data front, building permits and housing starts for July will be out as of 12:30 GMT, while the release of the latest FOMC minutes is scheduled at 18:00 GMT.

According to Fed funds tracked by CME Group’s FedWatch tool, traders are currently pricing in a 46.8 percent probability of a third 25-basis points rate increase by December.

From a technical perspective, the USDJPY has been able to break above the 110 mark and hold above it for the time being. However, the situation remains unstable and a dovish interpretation of the minutes could weigh significantly on the pair. Cautious positioning is suggested.

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