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Yen Gains on Nikkei Drop, Aussie and Kiwi Dollars Tumble After RBA

Yen Gains on Nikkei Drop, Aussie and Kiwi Dollars Tumble After RBA

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Yen Gains on Nikkei Drop, Aussie and Kiwi Dollars Fall After RBA
  • Pound, US Dollar Unlikely to Find Lasting Fuel in Upcoming Data
  • See Data Outcomes Directly on Charts with the DailyFX News App

The Japanese Yen outperformed in overnight trade, rising as much as 0.8 percent against its leading counterparts. The move tracked a sharp decline Japan’s benchmark Nikkei 225 stock index, pointing to risk aversion as the catalyst behind a swell in demand for the safety-linked currency.

The Australian Dollar proved weakest on the session – sinking as much as 1.97 percent against the majors – after the Reserve Bank of Australia cut its benchmark lending rate to 2.25 percent and issued a strongly dovish policy statement hinting at further easing up ahead. The New Zealand Dollar followed the Aussie downward, losing 1.2 percent.

Looking ahead, a quiet economic calendar in European and US trading hours may allow established momentum to continue to play out. S&P 500 index futures are pointing lower, hinting the Yen may enjoy continued sentiment-based support. Meanwhile, the Aussie and Kiwi Dollars might have scope for deeper losses as investors outside of Asia take their turn to react to overnight developments.

January’s UK Construction PMI reading is expected to show the pace of activity growth in the home-building sector slowed to the weakest since July 2013. UK economic news-flow has increasingly outperformed relative to consensus forecasts however, opening the door for an upside surprise. That may offer a bit of a boost to the British Pound, but significant follow-through seems unlikely.

On the other side of the spectrum, realized US data outcomes have increasingly weakened relative to expectations, suggesting December’s Factory Orders reading may yield a more disappointing result than the 2.4 percent decline penciled in by analysts. That may push back against Fed rate hike bets and apply downward pressure on the US Dollar. Here too however, the extent of the move may be limited as traders await Friday’s much-anticipated payrolls figures.

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Asia Session

GMTCCYEVENTACTEXPPREV
22:30AUDANZ Roy Morgan Weekly Consumer Conf112.4-113.2
23:00NZDQV House Prices (YoY) (JAN)5.7%-4.9%
23:50JPYMonetary Base - End of Period (¥ ) (JAN)278.6T-275.9T
23:50JPYMonetary Base (YoY) (JAN)37.4%-38.2%
0:00NZDANZ Commodity Price (JAN)-0.9%--4.4%
0:30AUDTrade Balance (A$) (DEC)-436M-850M-1016M
0:30AUDBuilding Approvals (MoM) (DEC)-3.3%-5.0%7.7%
0:30AUDBuilding Approvals (YoY) (DEC)8.8%5.1%10.2%
3:30AUDReserve Bank of Australia Rate Decision2.25%2.50%2.50%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
7:00CHFTrade Balance (CHF) (DEC)1.52B (A)3.80BMedium
7:00CHFExports (MoM) (DEC)-3.1% (A)0.1%Low
7:00CHFImports (MoM) (DEC)0.7% (A)-3.0%Low
7:00CHFUBS Real Estate Bubble Index (4Q)1.28 (A)1.29Low
9:30GBPMarkit/CIPS UK Construction PMI (JAN)57.057.6Medium
10:00EUREurozone PPI (MoM) (DEC)-0.7%-0.3%Medium
10:00EUREurozone PPI (YoY) (DEC)-2.5%-1.6%Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.11611.12441.12931.13271.13761.14101.1493
GBPUSD1.48591.49541.49961.50491.50911.51441.5239

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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