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  • The yen has been perky as we progress through the North America session with USD/JPY dropping from the 112 handle down to 111.63 the low.
  • The EUR/JPY cross has dumped a significant 54 pips as well and is testing the support made up of the triple highs from back on the 25th July.

Currently, EUR/JPY is trading at 130.26 having made a low of 130.23 and from a high of 131.10. The yen took up the bid with US stocks in the red – Stocks reversed early gains to trade mostly lower Wednesday due to fresh concerns over the U.S.-China trade friction that overshadowed positive results from Apple and strong labour-market data – The DJIA is down around 60 points and the S&P -3 points at the time of writing. However, they are off their lows and the markets are starting to stabilise once again leading into the FOMC.  

Data from the eurozone today came with German retail sales increasing by a strong 1.0% m/m in June after falling -1.6% in the previous month. This follows yesterday’s release of eurozone inflation that rose 2.1% y/y in July while GDP increased by 0.3% Q/Q in the second quarter, missing the market estimate and sending the euro lower.   As for US data, with respect of the ADP report, it was the best reading since March and a solid prelude for nonfarm payrolls on Friday where nearly every industry posted strong gains and small business hiring picked up. The US July ISM manufacturing index that missed expectations on the headline, coming in at  58.1 vs 59.4 expected, the employment aspect of the report did beat expectations, arriving at 56.5 vs 56.0 prior. FOMC preview:

  • FOMC Preview: don’t get over excited, probably there won’t be much to see here

Today’s offering from the FOMC is not expected to offer much in the way of new news and only the statement can be scrutinised for a potential catalyst for the market for there are no updated projections nor a presser from Powell. There are no major tweaks expected from the policy statement and 4 rate hikes are still to be expected. The message should be the same, although there could be some risk mentioned with regards to trade.  

EUR/JPY levels

EUR/JPY has been seeing a strong recovery off the 55-day ma and the top of the daily cloud at 129.05, as noted by analysts at Commerzbank:

“Provided the market holds over 129.05, we will look for recovery back to the 200-day ma at 131.78. The market has recently broken above the daily cloud for the first time since February and we look for the 200 day ma and recent high at 131.80/98 to be eroded shortly. We look for further gains to the 133.48 April peak. Dips are indicated to hold over 129.00.”