Yen Dropped as US Stocks Rose by Yan Xu

The yen dropped versus high-yielding currencies as US stocks rose with boost from technology sector.

The S&P 500 index climbed more than 1 percent, and the Dow Jones industrial average gained more than 100 points. Strong US equities performance today helped investors pick up confidence in carry trades. The dollar edged up to 116.40 versus the yen, while the sterling rallied 250 pips against the yen.

US August manufacturing ISM fell from 53.8 to 52.9 in August as expected. A reading above 50 indicates an expansion in manufacturing sector, raising speculations that the nation¡¯s economic growth is more likely to slow down gradually rather than deteriorating.

Euro zone July PPI came out at 1.8% in July, down from 2.3% in the previous month but above the estimate of 1.7%. The region¡¯s GDP rose at a quarterly rate of 0.3% in the second quarter, down from the previous reading of 0.7%.

Before the financial market turmoil recently, the ECB was widely expected to raise rates on this Thursday¡¯s policy meeting after raising interest rates from 3.75% to 4.0% in June.

EURUSD will face interim resistance at 1.3650, followed by 1.3680 and 1.37. Additional ceilings will emerge at 1.3730, backed by 1.3750. Support starts at 1.36, backed by 1.3570, 1.3550 and 1.3520. Subsequent floors are eyed at 1.35.

GBPUSD encounters interim resistance at 2.0150, backed by 2.0180 and 2.02. Subsequent ceilings will emerge at 2.0230, followed by 2.0250 and 2.0280. On the downside, support begins at 2.01, followed by 2.0070 and 2.0050. Additional floors are eyed at 2.0020, backed by 2 and 1.9980.

USDJPY encounters interim resistance at 116.50, backed by 116.80 and 117. Subsequent ceilings will emerge at 117.30, followed by 117.50 and 118. On the downside, support begins at 116 and 115.80, followed by 115.50. Additional floors are eyed at 115.30, backed by 115 and 114.80.