The pair has been trading in a narrow range for quite some time now. US VIX near 2007 lows, strength in equity markets and lackluster US treasury yields provide no clear trigger to Dollar-Yen pair. The silence in USD/JPY pair is alarming given that pair hardly moved during the recent Iraq crisis.
The action in USD/JPY pair today during Asian and early European restricted around 101.90 levels. Consumer confidence data and New homes sales data in U.S. surpassed market expectations by big margin. However the ten year treasury yields have managed to recover to 2.61% from intraday low of 2.58%. Recovery in yields along with gains in US stocks has pushed USD/JPY pair to 102.10 levels.
USD/JPY pair can test 102.20 levels today while pair has support around 101.80 levels. Given that stocks are trading record high levels, solution to Iraq crisis is yet to be reached and VIX near 2007 lows, I prefer to Sell USD/JPY pair on rise. Yen also stands top gain if the slide in Dubai realty stocks and stock index continues to unravel in days ahead.
Single currency remains under pressure against the US Dollar due to disappointing stream of macro economic data out of EU. German IFO surveys for the month of June failed to meet market expectations. Though assessment for the currency situation remained good, corporates fell less optimistic about future. The disappointing survey results came in one day after German private sector activity slowed down in June.
Single currency did recover from its post German IFO release slump. Strong housing and consumer confidence data in US limited gains in EUR/USD around 1.3625 levels. The pair currently trades at 1.36 levels. So long as the pair trades below 1.3616, bears are likely to be control and we are likely to EUR offered on rise. On the downside EUR/USD has support around 1.3570 levels. It is advisable to Sell EUR/USD so long as the pair remains below 1.3616. A close above 1.3616 on hourly or four hourly chart would open doors for 1.3682.
Pound-Dollar has declined to 1.6874 after Bank of England governor Carney came out dovish in his testimony today. In testimony before parliament's Treasury committee, Governor Mark Carney said a hike in interest rates would be "limited and gradual". Markets have been bidding up Pound on hopes that Bank of England would be the first major central banker to hike interest rates and that too in 2014 or first half of 2015. However Carney expressly stated that exact timing of interest rate hike cannot be stated as it would be data dependent. I believe Carney's testimony today is dovish and mainly lacks clear indication of timing of interest rate hike. This in my opinion is enough to shave off 200-250 pips from GBP/USD pair. It is worth noting that ten year Gilt yields are largely unchanged at 2.73% despite dovish comments from BOE governor.
GBP/USD pair currently trades closer to previous cyclical closing high of 1.6973. Pair is likely to fall to 1.6800 in days ahead. I recommend shorting GBP/USD pair closer to/above 1.7 levels. The latest high of 1.7061 will act as strong resistance level. Fall in GBP/USD would accelerate if the ten year Gilt yields start slumping.