Daily technical and fundamental analysis.
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Forex
Judging from the price actions in USD/JPY, it seems like risk aversion is the mildly stronger theme in the markets at this moment than weakness in commodity prices. There is growing concern that US government will bail out Fannie Mae and Freddie Mac. Weakness in the US stock markets is followed by Asian and then the European markets even though crude oil and gold remains pressured throughout.
BoJ left target overnight call rate unchanged at 0.5% as widely expected. The statement indicated that the bank had little option other than being on hold. CPI inflation is expected to be "somewhat higher" over the coming months while economic activity has slowed sharply.
Focus in the US session will be on new residential construction data and PPI inflation from US. Jul's strong rebound of 9.1% from 977k in housing starts was a surprise but economists expect housing starts to resume down trend and dive further even steeper to 17 year low of 960k annualized rate. Building permits is also expected to drop again to 980k. PPI inflation is expected to accelerate further to 9.4% yoy with core PPI rising to 3.2% yoy in Jul.
Current sharp fall on dovish comments from BOE's Besley suggests weakness to 1.8550/55 would be seen, however, break of 1.8510 support is needed to confirm recent decline has resumed, otherwise, recent 'volatile' trading would continue. Venture selling with stop as indicated, break would risk stronger gain to 1.8645/50 before retreat.
BoJ left target overnight call rate unchanged at 0.5% as widely expected. The statement indicated that the bank had little option other than being on hold. CPI inflation is expected to be "somewhat higher" over the coming months while economic activity has slowed sharply.
Focus in the US session will be on new residential construction data and PPI inflation from US. Jul's strong rebound of 9.1% from 977k in housing starts was a surprise but economists expect housing starts to resume down trend and dive further even steeper to 17 year low of 960k annualized rate. Building permits is also expected to drop again to 980k. PPI inflation is expected to accelerate further to 9.4% yoy with core PPI rising to 3.2% yoy in Jul.
Current sharp fall on dovish comments from BOE's Besley suggests weakness to 1.8550/55 would be seen, however, break of 1.8510 support is needed to confirm recent decline has resumed, otherwise, recent 'volatile' trading would continue. Venture selling with stop as indicated, break would risk stronger gain to 1.8645/50 before retreat.
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