JPY strengthens ahead of Central Bank meetings

Japanese retail sales data came in lower than expected at -0.2% versus the consensus of +0.8%. The Nikkei closed down 3.3%, with the futures now down nearly 4% as of writing, giving JPY a bid bias ahead of the technical support seen at 97.50 ( as below ). The catalyst for the move comes from weekend media speculation that the planned sales tax increase that was promised as part of the reforms by the Abe government has now been delayed or at the very least watered down. This has concerned the market that the Japanese government are backtracking on promised reforms.

The IMM position data released from the CFTC on Friday showed that long dollar positions have been reduced by 5% compared to the prior week, with the largest reductions not surprisingly coming against the euro.

The data calendar this week looks to set the tone for the summer markets as we await policy meetings from the Fed, ECB and BoE with non-farm payrolls released on Friday. With month end rebalancing also noted the FX markets should see some volatility. There is to be no press conference this month from Bernanke following the FOMC meeting. It is likely that we will have to wait until the minutes are released on the 21^st of August to gauge the latest Fed tapering thoughts.

Today’s data is a little light, with only UK mortgage approvals and US pending home sales on the agenda.

EUR/USD

Supports 1.3250-1.3225-1.3160 | Resistance 1.3300-1.3340-1.3385

USD/JPY

Supports 97.50-96.80-95.45 | Resistance 98.35-98.70-99.30

GBP/USD

Supports 1.5340-1.5285-1.5250 | Resistance 1.5415-1.5445-1.5500