Ranging market waiting for US GDP, core PCE

The US dollar fell against the euro but rose versus the yen in range-bound trading. Given the positive and negative US data, you must be wondering what’s going to happen on the charts. Yesterday, there were some rumours about the Chinese yuan revaluation, which could boost the yen and potentially hurt all the yen shorts in the market. Unless we get any clarification from government officials, the waters could be quite murky. Another issue concerning USD/JPY right now is the bill vote. Yesterday, US Treasury Sec Paulson reiterated that the China tariff bill by Schumer-Graham will not help solve issues. We can see…

that he’s really trying very hard to sway the decision-making process. USD/JPY’s next hurdle zone is around 117.80-118.30.

Fed Speak:
Fed’s Kroszner said last night that while there is still upside inflation risk, decline in energy prices recently has lessened that risk. Richmond Fed’s Lacker, the lone dissenter at the last FOMC meeting, meanwhile voiced his worries about the danger of inflation remaining above 3% on core CPI and 2.5% on the core PCE, for too long.

On the subject of the kiwi (NZD), the pullback I expected happened yesterday when NZD/USD had a false breakout through 0.6545 to bounce off around 0.6534 to hit 0.6580-ish. Meanwhile, with the bearish cloud over it right now, downside is favoured, with market stops below 0.6530 to target 0.6500, then 0.6460.

New Zealand Q2 GDP data, due today at 2245 GMT, are thus significant, and we’ll see if the economy has slowed down according to Cullen’s forecast. RBNZ’s projection is 0.4%.

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