As expected USDJPY 83 level has been defended by the BOJ and it's now trading above .84 as we have mentioned recently that The Japanese yen is well-exposed to the BOJ interventions threats which has become Imminent in this session with it looming above 83 as it is hard to give up to the demands for watching its currency appreciation after unexpected growing of the Japanese Q2 GDP by just .1% while it was waited to be to be .6% and amid increased probability of having further persisting deflation forces because of the suffering consuming pace in US which has not reached its end as it looks yet in a time of cooling growth tries in China which has increased worrying about prices currently as we have seen it in the beginning of this month calling for banking stress test suggesting declining of the housing prices by 60% which is the double of what was initially made at just 30% and it has obeyed for demand for further re-evaluation step used to be named gradual action by PBOC ...

after it has actually reduced the banks lending percentage to their capitals from the beginning of this year which worked too for the demands of cooling this overheating economy which caused prices rising risks could be appreciated finally by PBOC which can effect negatively on its demand for capitals goods from Japan and we have seen the Chinese PMI index coming down in July to just 51.2 while the Euro zone as a counterpart competitor of Japan is getting use of the EUR which has fallen trading well below 110 the Japanese yen and this can continue if BOJ let the yen to appreciate trading freely below 85 psychological level.

As we have referred yesterday the market has looked for reaching 1.3 after breaking 1.276 by the end of last week getting momentum with the breaking of 1.2935 whereas it has failed recently. The single currency has been supported this week by the EU Commission revising up of the European growth rate this year to 1.7% in 2010 thanks to the weak euro and the germane driving growth pace which has been revised up to 3.4% from 1.2% getting over last week worries about the recent European Stress tests results which could contain the market sentiment driving the European yielding curve up bringing back the doubts about the debt crisis future after wall street Journal report highlighted the exposure position of the European major banks to the governmental debts and from another side by the lighter than expected Basel 3 banking deal arguments for capping the exposure of the banks to the markets risks holding just 7% of their common equity money instead of 9.5% as what was expected delaying the working of this it to Jan 2019 which is very enough time to the banks which have seen in these new regulations cooling down of their the profits and tightening of their roles in the benefits of the borrowers for supporting the economy and keeping its roles on just lending conservatively with minimal possibility of taking risks directly and in the same time, capping of the available liquid amounts for lending to not be exposed again to a credit crisis as surely the cost of failing of a borrower is not the same as failing of a bank!

The equities market have started trading this week strongly with the release of August Chinese industrial productions which have grown yearly by 13.9% data underpinning the investors' risk appetite weighing on the greenback across the broad supporting the commodities and the energy prices pushing the gold above its all times high above 1269$

By god's will, The single currency next major resistances are at 1.3 then 1.3235, 1.333, 1.3352, 1.3415, 1.3704 and 1.3885 which is 61.8% Fibonacci retracement level of this same recent declining from 1.5142 to 1.1874 while the supporting levels are at 1.283 then 1.264, 1.2586, 1.255, 1.2452, 1.2165, 1.2044, 1.1954 and 1.1875 from 1.1875 which has been reached amid the increased worries about the debt crisis and could cap the pair from falling to 1.16 whereas the pair has started its rally to 1.604 before falling again to 1.233 amid the credit crisis and rising back forming a lower high at 1.515 in the beginning of last December.

Best wishes


FX Consultant

Walid Salah El Din

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