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FOREX: Dollar, Yen Pullback Likely to Continue as S&P 500 Futures Rise

FOREX: Dollar, Yen Pullback Likely to Continue as S&P 500 Futures Rise

2011-09-23 06:15:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • US Dollar, Japanese Yen Correct Lower as Markets Digest Risk Aversion
  • G20 Pledges Coordinated Action, Gives Tacit Approval to JPY Intervention
  • S&P 500 Futures Advance, Hinting Stocks-Linked Currencies to Rebound

The US Dollar and Japanese Yen corrected lower overnight as markets digested an aggressive bout of risk aversion that stoked safety demand and sent both currencies dramatically higher against their major counterparts over the preceding 24 hours. S&P 500 stock index futures are pointing firmly higher in late Asian trade, promising more of the same ahead.

Mildly supportive comments released in a statement from G-20 finance ministers compounded pressure on the go-to haven currencies. Policymakers said they are committed to a “strong and coordinated” response to emerging “financial system fragility” including “heightened downside risks from sovereign stresses”. They added that excess currency volatility hurts economic growth, echoing similar comments from Japanese authorities and seemingly hinting the international community has given the green light to continued official intervention into the Yen exchange rate.

The economic calendar is quiet through the end of the week, meaning little stands in the way of a deeper correction after global shares finished Thursdays’ North American session with a whopping 4.5 percent decline, the largest daily selloff in six weeks. The Swiss National Bank will publish its quarterly bulletin, which seems unlikely to offer much new information but will be scrutinized by markets nonetheless for details on the implementation of the EURCHF floor as traders gather evidence to gauge the scheme’s sustainability. New York Fed President Bill Dudley is scheduled to hit the wires, but the comments are unlikely to offer much considering they are coming so soon after the FOMC policy meeting.

Related: Australian Dollar Continues Recovery After Leading Indicators Data

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

0:00

AUD

Conference Board Leading Index (JUL)

-0.1%

-

-0.5% (R+)

1:35

CNY

MNI Flash Business Sentiment Survey (SEP)

59.3

-

55.4

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

EUR

French Wages (QoQ) (2Q F)

0.6%

0.6%

Low

6:45

EUR

French Consumer Confidence Indicator (SEP)

83

86

Low

6:45

EUR

French Own-Company Production Outlook (SEP)

-

8

Low

6:45

EUR

French Production Outlook Indicator (SEP)

-

3

Low

6:45

EUR

French Business Confidence Indicator (SEP)

100

105

Low

7:30

CHF

Swiss National Bank Publishes Quarterly Bulletin

-

-

Medium

8:00

EUR

Italian Retail Sales s.a. (MoM) (JUL)

0.1%

-0.2%

Low

8:00

EUR

Italian Retail Sales (YoY) (JUL)

-1.0%

-1.2%

Low

8:30

GBP

BBA Loans for House Purchase (AUG)

33250

33417

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3366

1.3582

GBPUSD

1.5274

1.5589

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To receive future articles by email, please contact Ilya at ispivak@dailyfx.com

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