The stellar run in USD/JPY continued overnight, with the pair rallying ¥98.81. The pair had been struggling for a while as the USD underperformed, but it certainly seems to have come back to life. We will be eyeing a potential move to ¥100 in the short term, with the Jackson Hole meeting over the weekend likely to be a potential catalyst for further USD strength.
For the first time in 25 years, the Fed chairman will not be attending the Jackson Hole meeting. While many feel this means Jackson Hole will be a non-event, there are still plenty of opinionated Fed members who could voice opinions on the QE situation. We wouldn’t be surprised to hear comments that continue to steer tapering expectations for September/October.
Apart from Jackson Hole, the only significant piece of data to look out for will be new home sales data. The market is looking for a 487,000 rise in new home sales, which is slightly lower than the previous 497,000 reading.
Looking towards the risk space, the sterling and the euro remained offered against the greenback while the AUD maintained its momentum from the China PMI data. AUD/USD is back above 0.90 and just holding on, with risk sentiment somewhat improved in the short term. We feel it is crucial for the pair to hold this 0.90 level to prevent a further loss of confidence in the short term.
EUR/USD is sidelined at 1.335 and hasn’t really gained any traction from yesterday’s positive PMI readings.