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Daily Forex Technical Report

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Mid−Day Forex Technical Report − Yen Rallies Even Though Stocks Rebound

Wed, Jan 21 2009, 15:25 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Mid-Day Report

Yen Rallies Even Though Stocks Rebound

The Japanese yen continues to be firm even though DOW rebounds over 100 pts in early US session and is back above 8000 level. Though, this time, yen's strength is most apparent against the greenback with USD/JPY dive through 90 level. EUR/JPY remains soft but is still holding above today's day low so far. Dollar retreats against most currencies instead and the dollar index fails to sustain earlier gains. However, note the rebound in stock is much less than yesterday's 300 pts fall. Recent weakness in the global equities markets is expected to continue and extend further. Both the dollar and yen are still in short term up trend against other major currencies, with the yen a bit stronger.

On the data front, Canadian wholesale sales dropped -1.6% mom in Nov, slightly above market expectation of -1.5%. The US NAHB housing market index is expected to be unchanged at a record low of 9 in January.

Unlike the market's expectation of a unanimous vote on December's 50 bps rate cut, the BOE's minutes revealed the MPC voted 8-1 to lower interest rate to 1.5%, the lowest since 1694. David Blanchflower originally suggested a 100 bps reduction but the committee believed either leaving the rate unchanged or cutting too much would unsettle the market which has already priced in 50 bps.

According to International Labor Organization (ILO), UK's unemployment rate rose to 6.1% in November from 6% in the previous month. The claimant count in December rose 77.9K to 1.16M, the highest level since Jan 2000, as economic continued to deteriorate. The 3-month average earning in November increased by 3.1% yoy, lower than +3.3% as market expected and in October. The nation's PSNCR rose significantly to 44.2B pounds, much more than consensus of 17.8B pounds and 10.32B pounds a month ago.

BoE Governor King said overnight that it's sensible for MPC to prepare for the possibility to "move beyond" conventional instrument as downside risks of inflation remains high even though the bank has 'big cuts' in the interest rate already. This is affirming market's expectation that BoE will soon follow BoJ and Fed to enter quantitative easing. Also King said that UK officials may start buying assets within weeks to loosen credit markets as the record low interest rates in UK fails to avert a marked recession.

Released overnight, New Zealand's retail sales remained unchanged in November from the previous month, better than market expectation of a drop of -1.2% and October's -1.3% fall. The 325 bps cut in interest rate since July 2008, reduction in income tax and sharp fall in oil price helped boost consumer spending. In Australia, Westpac consumer confidence slid by2.2%, the first decline in 3 months, in January after rising 7.5% in December. According to the survey, Australian consumer became more optimistic on their household finance. However, they are worry much about global economic outlook. Germany PPI dropped -1.0% mom in Dec and moderated from 5.3% yoy to 4.3% yoy.

More Forex Technical Analysis Reports Here.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 89.28; (P) 90.13; (R1) 90.57; More.

USD/JPY dives further to as low as 89.22 in early US session and at this point, intraday bias remains on the downside as 90.18 minor resistance holds. Further break of 88.47 will confirm that fall from 84.61 as resumed. As discussed before, corrective rise from 87.13 should have completed with three waves up to 94.61. Break of 87.13 will confirm medium term down trend resumption. On the upside, above 90.18 will turn intraday outlook neutral and bring more choppy consolidation before resuming recent decline.

In the bigger picture, with USD/JPY still staying below 55 days EMA, fall from 110.66 should still be in progress. On resumption, such decline should target 100% projection of 124.13 to 95.77 from 110.66 at 82.3. However, considering bullish convergence condition in daily MACD, another rise above 94.61 will be another alert that whole decline from 110.66 has completed. Focus will then be on 100.54 resistance for confirmation.

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Published on  Wed, Jan 21 2009, 15:35 GMT