FX Daily Strategy: Asia, Aug 21

The July National CPI is expected to arrive below 2%, artificially cushioned by the extended stimulus. With domestic demand still soft, it is hard to see any hawkish surprise from the data. Yet, it should be getting closer to the target range with fading base effect. The real figure will be revealed after the end of Q3 where stimulus ends. Such CPI will unlikely to change BoJ's mind and should be not very market moving.

On the chart, the pair steadied at the 158.00 level as prices consolidate sharp pullback from the 159.78 Tuesday's high. Consolidation here is expected to give way to fresh selling pressure later as daily studies unwind overbought readings. Break below 158.00 will see room for deeper pullback to retrace strong bounce from the 155.22 low towards the 157.00 level and 156.65 support. Below here will return focus to the 155.22 low. Meanwhile, resistance is lowered to the 158.50/159.00 area which is expected to cap and sustain pullback from the 159.78 high.

On the chart, cautious trade is giving way to a drift lower, as intraday studies turn down, with prices currently testing levels just below support at 99.50. A break will open up the 99.20 Fibonacci retracement. But mixed daily readings should limit any initial tests in consolidation, before bearish weekly charts prompt further losses. A close beneath here will add weight to sentiment and extend late-June losses towards congestion around 99.00, ahead of the 98.60 resistance. Meanwhile, resistance remains up to congestion around 100.00. An unexpected break should meet fresh selling interest beneath the 100.35 weekly low of 15 July.