YEN SLUMPS TO TWO-MONTH LOW AFTER DISAPPOINTING MANUFACTURING NUMBERS
The Japanese yen fell to a two-month low after the worst manufacturing numbers in almost two years. This was mostly due to trade war fears and how tensions could affect external product demands. The PMI was 52.9, which was lower than the 53.1 that traders had expected. This data came two days after the country’s trade numbers showed increased exports and a day after the Prime Minister, Shinzo Abe, won the support of his party. It also came after consumer inflation rose to the highest level in 6 months. The national CPI rose by 1.3%, which was higher than July’s 0.9%.
Yesterday, the euro jumped sharply against the US dollar as the crisis in the emerging markets eased. This effectively ended the narrow range trading that has happened in the past week. Yesterday, the Turkish government announced that it will reduce investments in a bid to reduce borrowing. This came after the central bank raised interest rates to support the currency. Today, manufacturing PMI data from Germany will be released, which will be a good indicator of the performance of the economy. Traders expect the PMI to reduce to 55.7 from last month’s 55.9.
This month, the Canadian dollar has strengthened significantly against the US dollar. It is now trading near the monthly high. The currency has been supported by positive economic data and the willingness of the Reserve Bank of Canada (RBC) to adjust its monetary policy. Inflation numbers from Canada will be released today. Traders expect the CPI to rise by 2.8%. This will be lower than July’s 3.0%. The core CPI is expected to slow to 1.5%, which will be lower than July’s 1.6%. On the other hand, retail sales are expected to improve to 0.4% while the core retail sales are expected to improve to 0.6%.
This week, the USD/CAD pair touched the important support of 1.2887 as the dollar weakened. It is now trading slightly above that level at 1.2900. By reaching this support, the pair completed the first phase of the inverted cup and handle pattern. This means that the pair will likely start moving up slightly as it completes the handle phase. The signs of the new phase are seen with the divergence between the price action and the momentum indicator below. There are also signs that a crossover between the 14 and 28-day EMA is happening.
The Japanese yen has fallen against the USD and is currently trading near the two-month low. On the four-hour chart below, the pair completed the cup pattern in July. It then formed the handle position that led it to a low of 109.76. In the past two months, the pair has attempted to move up. There is a likelihood that the pair will continue moving up to test the 113.74 level.
The EUR/USD pair made a major breakout yesterday after weeks of trading within a narrow range. The pair reached a high of 1.1783, which was the highest level since July this year. The movement was expected since the near-symmetrical triangle pattern had already reached the apex by yesterday. There is a likelihood that the pair will continue the upward momentum ahead of next week’s Fed decision.