Nikkei rally sparks dollar rally

The dollar enjoyed a good session overnight despite the Labor Day holiday in the US, with events in Japan inspiring the rally. The Nikkei is trading towards the 16,000 level as USD/JPY finally broke above the 104.50 resistance as rumours circulated that Japanese PM Abe is going to offer reform-friendly Shiozaki the role of health minister in this week’s much publicised cabinet re-shuffle. The Abe administration has been very vocal in their aim to diversify the GPIF’s investments with Shiozaki seen as the biggest advocate of changing the funds structure and culture.

As widely expected, the RBA left policy unchanged as the bank continued its communication of interest rate stability and spare capacity in the labour market which has become a favourite in the G10 Central Bank space. There has been a slight change in language on the AUD as they see the exchange rate “above most estimates of its fundamental value.” The Australian current account came in a touch smaller than expected at AUD 13.7 billion and building approvals improved on the month.

With 17 days to go until the Scottish independence vote the latest polls show a shift in voting since pro-independence leader Alex Salmond won the latest TV debate. The latest YouGov poll has seen an eight-point rise for the Scottish Independence, bringing the total tally to 53% for no, and 47% for yes.

The data calendar is dominated by construction numbers in the form of PMIs from the UK and US, along with the ISM manufacturing activity index from the US.

EUR/USD

Supports 1.3110-1.3085-1.3050 | Resistance 1.3150-1.3200-1.3270

USD/JPY

Supports 104.50-104.00-103.80 | Resistance 104.95-105.10-105.50

GBP/USD

Supports 1.6535-1.6520-1.6485 | Resistance 1.6620-1.6665-1.6700