Japanese yen spikes after sudden Shinzo Abe resignation
The Japanese yen pared earlier losses after the sudden resignation of Shinzo Abe, Japan’s longest-serving prime minister. In a statement, Abe, who is known for his Abenomics policies, said he will remain in office until his successor is chosen. He blamed his worsening medical condition for the decision. According to the Wall Street Journal, he has long suffered an autoimmune condition known as ulcerative colitis. Earlier today, the currency reacted to weak inflation data from Tokyo. According to the statistics office, core consumer inflation in Tokyo dropped by 0.3% in August after rising by 0.4% in the previous month. Other data showed that the headline CPI rose by 0.3%.
The euro rose today, erasing the losses made yesterday after the statement by Jerome Powell. The pair was reacting to the strong economic data from the Eurozone, Germany, and Sweden. According to the European Commission, the business and consumer survey increased to 87.7 in August. That was higher than the previous increase of 82.4. Industrial and services sentiment increased to -12.7 and -17.2, respectively. Meanwhile, in Sweden, data from the statistics office showed that the economy contracted by 7.7% and 8.3% year-on-year and QoQ, respectively. That was a better decline than the -8.6% and 8.2% that analysts were expecting. In Germany, the import price index fell by 4.6% in July.
The Canadian dollar rose against the US dollar as investors reacted to Canadian GDP data. According to the Canadian statistics office, the country’s economy contracted by 11.5% in the second quarter. That was the second consecutive quarter being in the red after it dropped by 2.1% in the first quarter. The economy grew by 6.5% in June. Separately, data from the United States showed that personal income rose by 0.4% in July while personal spending rose by 1.9%. The core PCE price index rose by 1.3% and 0.5% on a YoY and MoM basis, respectively.
The EUR/USD pair is trading at 1.1900, which is the highest it has been since August 18. On the four-hour chart, the price is above the 50-day and 100-day EMAs. It is also above the upper resistance line of the ascending channel that is shown in yellow. Also, the on-balance volume, which was previously in a downward trend has risen. Therefore, the pair is likely to continue rising as bulls aim for the next resistance at 1.1950.
The USD/JPY rose to an intraday high of 106.95 immediately following the news on Shinzo Abe’s resignation. It then pared gains and is now trading at 105.35, which is the lowest it has been since August 19. On the four-hour chart, the price has moved below the yellow triangle pattern. It is also below the dots of the Parabolic SAR and the 50-day and 25-day exponential moving average. Therefore, it seems like bears have prevailed, which will likely see the pair move below 105.00.
The USD/CHF pair dropped to an intraday low of 0.9030, which is the lowest it has been since August 19. The pair is below the important support of 0.9065 while the RSI has been in a sharp downward trend. The price action shows that bears have prevailed, which means that the pair is likely to test the important support at 0.9010.