JPY Breached 110 After Mixed Tankan, AUD Lower On Retail Sales
ActionForex | Oct 01, 2014 02:46AM ET
Yen weakens against the broadly strong dollar with USD/JPY breaching 110 handle. The Tankan survey overall showed mixed sentiments in Q3 and provided little support to the yen. The large manufacturing index improved from 12 to 13 versus expectation of 10. However, medium and small manufacturing indices both deteriorated to 5 and -1 respectively. Large non-manufacturing index dropped from 19 to 13 versus expectation of 17. Medium and small non-manufacturing indices also deteriorated to 7 and 0 respectively. Large, medium and small all industries indices dropped to 13, 6 and 0 respectively. Nikkei is little changed after the release and fluctuated between small gain and loss in the Asian session.
Australian dollar is under fresh pressure after disappointing sales data. Retail sales rose 0.1% mom in August versus expectation of 0.4%. The official China manufacturing PMI was unchanged at 51.1 in September slightly better than expectation of 51.0. AUD/USD dips to as low as 0.8664 so far and is heading to four year low of 0.8659. Comparing the Aussie and yen, the Aussie is clearly weaker in near term. The current development argues that the corrective rise from 86.40 could have completed at 98.67 after hitting 61.8% retracement of 105.42 to 98.67. Near term focus is on 93.92 support and break will pave the way to lower channel support (now at 90.58).
Looking ahead, manufacturing data will be a main focus today. Swiss will release SVME PMI, Eurozone will release finalized manufacturing PMI. A main focus is UK PMI manufacturing which is expected to rise slightly from 52.5 to 52.6 in September. Sterling might not gain much against dollar in case of upside surprise in the reading. But EUR/GBP could dive to test a key support level of 0.7755 in case of a strong number from UK today. From US, ADP employment is expected to show 204k growth in September. ISM manufacturing is expected to drop slightly to 58.5 in September.
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