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Daily Forex Technical Report

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Daily Forex Technical Report − Yen Weakens after More News on Bank Rescue

Mon, Oct 20 2008, 07:14 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Yen Weakens after More News on Bank Rescue

Yen weakens again today after more news on bank rescue was announced. South Korea said that it will guarantee $100b in bank debts and provide $30b to financial institutions after S&P warned that it may lower the nations' lenders' credit ratings. New Zealand Finance Minister Cullen said that RBNZ and Treasury are "working on a possible wholesale deposit guarantee scheme." The Netherlands government will buy non-voting preferred shares in ING to provide $10b euros to the bank. ECB Trichet urged banks to "normalize their relationships" and start "lending to each other" after central banks' cash injection into the financial system. Technically, dollar and yen pairs are still bounded in consolidation but there is no change in the medium term dollar and yen bullish outlook yet. Though, as discussed before, such consolidation will likely follow consolidation in the equity markets and continue for a while.

Released overnight, UK Rightmove house prices posted -4.9% yoy fall in Oct, the biggest annual decline in at least six years. Australian PPI rose faster than expected by 2.0% qoq in Q3 with yoy rate up from 4.7% to 5.6%. Germany PPI rose 0.3% mom, 8.5%, also above expectation. Canadian wholesale sales and US leading indicators will be released later today. Focus will also be on Fed Bernanke's testimony at House Budget Committee.

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USD/JPY Daily Outlook

Daily Pivots: (S1) 100.89; (P) 101.35; (R1) 102.10; More.

USD/JPY's rise from 99.27 extends further today and reaches as high as 102.41 so far. But after all, price actions from 97.92 is still treated as consolidation in the whole fall from 110.66. As long as 103.49/54 resistance holds, such decline from 110.66 should still be in progress. Below 99.27 will bring retest of 97.91 low and break confirm recent decline has resumed for retesting 95.77 low. However, sustained break of 103.54 will argue that fall from 110.66 has completed and focus will turn to 106.14 resistance for confirmation.

In the bigger picture, medium term rise from 95.77 has completed at 110.66 with bearish divergence condition in daily MACD. Also, the three wave structure of such rise argues that it's just correction, or part of the consolidation to the down trend from 124.13. Hence, deeper fall is now expected to retest 95.77 low. Break will confirm that whole down trend from 124.13 has resumed and should target 61.8% projection of 124.13 to 95.77 from 110.66 at 93.13 first. On the upside, above 106.14 resistance will indicate that fall from 110.66 has completed. This will suggest that medium term consolidation from 95.77 is probably still in progress. In such case, another test of 110.66 could be seen before resuming the down trend from 124.13.

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Published on  Mon, Oct 20 2008, 07:26 GMT