USDJPY Retreats on Improved CPI Data, Uncertainty over US Fiscal Deadlock Grows - 27.9.2013
Today we will begin our briefing with the Japanese Yen since Japanese CPI surprised market participants moving closer than expected to BOJ target. The National Consumer Price Index rose by 0.9% for August beating estimates of 0.8% while in July stood at 0.7%. Excluding fresh food CPI advanced by 0.8% more than projected and up from previous reading at 0.7%. The Japanese yen strengthened noticeably with the USDJPY falling from resistance at 99.10 to as low as 98.56.
Moreover, the USDJPY generally has been in 99.66/98.27 range in recent trading influenced by many potential events. Possible retail sales tax hike that the Japanese government plans could weaken Yen but on the other hand a likely corporate tax cut could offset weakness.
At the same time US budget talks and growing concerns over US government defaulting as well as Fed asset tapering is key drivers of that currency. Technically you can see at the chart below that a possible symmetrical triangle pattern is formed suggesting continuation of the previous positive structure.
USDJPY Triangle
Elsewhere, the US dollar against its major peers depreciated as fears of government shut down are increasing. Political uncertainty is growing due to Republicans denying voting for an increase in borrowing limit in an attempt to delay Obamacare law. As a result, the US dollar index eased from resistance at 80.60 and was lastly seen at 80.41.
Lastly, the British pound against the greenback weakened after the yesterday release of widening Current Account deficit and disappointing second quarter growth data in annual terms but earlier today recovered all previously lost ground, climbing to 1.6128. However, key resistance at 8-month high at 1.6161 could increase weight on the pair pushing it to dip back.
To close, the EURUSD is maintained in 1.3536/1.3464 range trading pattern against the US dollar and its closer to its bottom at the moment ahead of Euro zone confidence and inflation indicators. Later on Friday, US releases for Consumer Spending and Consumer Confidence indicators would impact the market.