Yen attempting to breach the 100 psychological level against U.S. dollar

It seems that the record highs for Wall Street on Monday were not enough to boost risk appetite in Asia. The Yen is outperforming all major currencies today, strengthening by more than 1% against the dollar as investors continued to reduce their bets for a Fed rate hike in 2016.  USDJPY is trading at 100.16 at the time of writing the report, this is the lowest level in 5 weeks and there is likely to be a high level of interest in buying the pair at current levels. However, a break below 99.90 could lead to triggering stop losses and send the pair even lower towards 99.08 (24-June low). Negative interest rates and ETF’s buying do not seem helping BoJ to drive the currency lower, so let’s see how creative they become in their next monetary policy meeting in September 21.

Pound recovering slightly, sentiments remain negative

Cable rebounded slightly on Tuesday, retracing some of Monday’s losses against the U.S. currency after approaching post-Brexit lows on the back of falling housing prices. According to Rightmove, average asking price fell by £3,602 in August, or 1.2% compared to July. Although a drop in property prices is common in summer time, traders are just finding excuses to short the pound.

GBP has been the weakest major currency in August, falling by more than 2% against the dollar and 3% against the Euro. Sentiment remain very negative, and this was clearly reflected in U.S. CFTC data showing hedge funds increased their bets on the falling pound with net short positions reaching a record high of 90,082 contracts in the week to August 9. Although risks are skewed to the downside, it might be very bumpy if speculators decided to take profits, suggesting that a recovery could be seen before trending lower again.

Hard data will start flowing from the U.K. with first employment, retail sales, and inflation reports post the referendum vote. Softer than expected readings will intensify fears that more QE will be required, which could send U.K. gilt yields to new record lows, adding more pressure on the weak sterling.