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Daily Forex Technical Report

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Daily Forex Technical Report − Yen Surges as Risk Aversion Dominates

Thu, Oct 23 2008, 07:03 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Yen Surges as Risk Aversion Dominates

The Japanese yen dominates the last two trading sessions on risk aversion as global stock markets tumble. In, particular, note that USD/JPY has now taken out 97.91 recent low and is set to retest 95.77, suggesting that the focus is shifting from dollar to the yen too. The MSCI Asia Pacific Index lost over 3% to the lowest level since May 2005. South Korea stock market is hardest hit, plunging over 9% on won's meltdown. Japanese Nikkei is also down nearly 2.5%. Dollar turns into consolidation after dollar index breached 86 level briefly and remains firm so far.

RBNZ cut overnight cash rate by 100bps to 6.5% as widely expected. In the accompanying statement, RBNZ said that the "ongoing financial market turmoil and a deteriorating outlook for global growth have played a large role in shaping today's decision." The bank also expressed concern on "lower demand for exports" and "less readily available credit". On the other hand inflation concern eased with "weaker short-term growth" and "sharply lower oil prices". Markets generally expect further rate cut from RBNZ in Dec by another 50bps.

On the data front, main focus in the European session will be retail sales in UK which is expected to show -0.9% mom contraction. Year-over-year growth is expected to drop from 3.3% to 2.0%. Eurozone industrial orders will also be released. To be released in the US session, initial jobless claims is expected to remain elevated at 470k, up from prior 461k. Aug house price index is expected to fall -0.4% mom. Bank of Canada will also release its monetary policy report.

More Forex Technical Analysis Reports Here.

USD/JPY Daily Outlook

Daily Pivots: (S1) 96.37; (P) 98.47; (R1) 99.74; More.

USD/JPY's fall from 102.41 extends further to as low as 96.85 today before recovering mildly. Break of 97.91 confirms that whole decline from 110.66 has resumed and should be targeting 95.77 low. On the upside, above 99.33 will turn intraday outlook neutral but further fall is still expected as long as 102.41 resistance holds.

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. Break of 95.77 low 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 102.41 resistance will indicate that fall from 110.66 has completed. This will also 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  Thu, Oct 23 2008, 07:52 GMT