Japan’s elections and from Australia, RBA’s minutes

In Japan, the ruling coalition lost the majority in the upper legislative House in yesterday’s election. The election results seem to have been anticipated by the markets as the Yen firmed in today’s opening and remained relatively stable. Political stability in Japan is now at risk as Japanese PM Ishida vowed to stay in power, yet doubts about his leadership emerge. It should be noted that the issue emerges in a critical moment as Japan is in trade negotiations with the US while at the same time the result may add pressure on BoJ to refrain from tightening its monetary policy, given also the slowdown of June’s CPI rates. As mentioned JPY got some support in today’s opening, implying that the market may have been prepared for a worse scenario, yet also note that It’s a public holiday in Japan today, so we may see a delay in the market’s reaction.

USD/JPY dropped breaking the 148.20 (R1) support line, now turned to resistance. In its downward motion the pair has broken also the upward trendline guiding the pair since the 1st of July, signaling an interruption of the pair’s upward movement, hence we switch Friday’s bullish outlook for a sideways motion for now. Should the bulls regain control, we may see the pair breaking the 148.20 (R1) resistance line and start aiming for the 151.20 (R2) resistance level. Should the bears take over, way see USD/JPY, aiming if not breaking the 145.50 (S1) support level.

Despite RBA’s latest interest rate decision to remain on hold, the market seems to expect the bank to deliver three rate cuts until the end of the year, a signal of substantial dovish expectations for the bank’s policy. In tomorrow’s Asian session, we note the release of RBA’s July meeting minutes and should the document show dovish intentions by the bank’s policymakers we may see the Aussie losing ground, while should they seem prepared to delay further any rate cuts, we may see the Aussie getting some support as the market may have to readjust its dovish expectations.

AUD/USD remained stable just below the 0.6515 (R1) resistance line in today’s Asian session. Given that the pair broke on Thursday the upward trendline guiding it, we maintain a bias for a sideways motion currently. The RSI indicator remains close to the reading of 50, implying a relative indecisiveness on behalf of the market for the pair’s direction, while the Bollinger bands have started to narrow implying less volatility for the pair. Should the bulls take over, we may see the pair breaking the 0.6515 (R1) resistance line and start aiming for the 0.6690 (R2) resistance level. On the flip side, we may see the pair aiming if not breaching the 0.6340 (S1) support level.

Other highlights for the day:

Today we get Canada’s PPI rates for June and in tomorrow’s Asian session, we get New Zealand’s trade data also for June.

As for the rest of the week:

On Tuesday, Fed Chairman Powell is scheduled to speak and on Wednesday we get Euro Zone’s preliminary consumer confidence for July is due out. On a packed Thursday, we get the preliminary PMI figures for July of Australia, Japan, France, Germany, the Euro Zone as a whole, the UK and the US while we also note the release of the Japan’s chain store sales for June, Germany’s GfK consumer sentiment for August, UK’s CBI trends in industrial orders for July and CBI Business optimism for Q3, from the US the weekly initial jobless claims figure and Canada’s retail sales, while on a monetary level, we note from Turkey CBT’s interest rate decision and from the Euro Zone we highlight ECB’s interest rate decision and ECB President Lagarde’s subsequent press conference. On Friday, we get from Japan, Tokyo’s CPI rates for July, UK’s retail sales for June, Germany’s July Ifo indicators and the US durable goods orders for June.

USD/JPY Daily Chart

• Support: 145.50 (S1), 142.20 (S2), 139.20 (S3)
• Resistance: 148.20 (R1), 151.20 (R2), 151.65 (R3)

AUD/USD Daily Chart

• Support: 0.6340 (S1), 0.6130 (S2), 0.5915 (S3)
• Resistance: 0.6515 (R1), 0.6690 (R2), 0.6940 (R3)

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