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Daily Forex Technical Report

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Daily Forex Technical Report − Yen Stays in Range after BoJ on Hold and Cut Forecasts

Thu, Jan 22 2009, 08:32 GMT
by ActionForex.com Team

ActionForex.com

Action Insight Daily Report

Yen Stays in Range after BoJ on Hold and Cut Forecasts

The Japanese yen remains in range after volatile price actions in the past 24 hours. BoJ left rates unchanged at 0.1% as widely expected. The bank has revised down both the growth in inflation forecasts for 2008 and 2009 fiscal years. GDP is expected to contract by -1.8% in 2008, down from prior forecast of +0.1% growth. In 2009, GDP is expected to shrink by -2.0%, down from prior estimate of +0.6%. Regarding inflation, BoJ expects -1.1% fall in 2009 , down from prior estimate of 0%. In separate release Japanese Trade deficit widened to -320b yen in Dec due to record drop in exports by -35.00% yoy.

On the data front, as recession in the Eurozone deepens, industrial orders remain in the downtrend and November's reading should come in at -4.8% mom, following a plunge of 4.7% in October. In Switzerland, ZEW economic expectation should have worsen to -77.5 in January (December -46.2). UK's January reading for CBI industrial trend is also anticipated to have dropped to -39 from -35 in December.

Note that highly volatile price actions are seen the dollar, surging to 23 year high against sterling and dropping to 13 year low against yen at the same time, then reversed. Focus will turn to whether US stock markets can extend yesterday's rebound, as well as the string of economic data to be released today. Housing starts in December probably fell to an annualized 610K in December compared with record low level of 630K in the previous month. Since Jan 2006, the reading has been plunged by 73%. December's building permits is also anticipated to have dropped to 610K from 620K in November. House price index in November will be released and should have been down 1.2% following a fall of 1.1% in November. Initial jobless claims are expected to have risen to 540K for the week ended Jan 17. However, 4-week average would have reached 2 months' low at 506.3K. The gauge has been volatile in recent weeks due to holiday seasons and the situation should remain like this in the near future given unusual auto factory shutdowns following the holidays.

Economic forecast Canada's leading indicator to have dropped another 0.7% in December. Concerning retail sales, November's reading would have dropped 1.5% after sliding 0.9% in the previous month. Ex. auto retail sales likely fell 1.4% over the month. After cutting interest rate to 1% Tuesday, the Bank of Canada will release the quarterly monetary policy report which is expected to reveal reduction in growth and inflation forecast.

Technically, while an intraday top is in place in the dollar index at 86.5 and some more pullback could be seen, short term outlook will remain bullish as long as 83.44 support holds. Current rise from 77.69 is still expected to extend towards 88.46 high. However, a break of 83.44 will argue that rebound from 77.69 has completed and bring deeper fall.

More Forex Technical Analysis Reports Here.

USD/JPY Daily Outlook

Daily Pivots: (S1) 87.67; (P) 88.91; (R1) 90.72; More.

USD/JPY dived to as low as 87.12, meeting mentioned 87.13 low as expected by rebounded strongly since then. An intraday low is no doubt in place and some more sideway trading should now be seen. But after all, there is no change in the short term bearish outlook with 90.15 minor resistance intact. Further decline is still in favor and break of 87.13 again will indicate that medium term trend trend has resumed for mentioned target of 82.3 next.

On the upside, though, above 90.15 will be the first alert that whole decline from 94.61 has completed. Further break of 91.29 resistance will confirm this case and bring stronger rebound. Still, even in such case, the corrective nature of rise from 87.13 to 94.61 and that from 94.61 to 87.12 suggest that USD/JPY is merely in the last leg of consolidation. In other words, medium term down trend should still resuming after another test of 94.61 in this case.

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, decisive break of 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  Thu, Jan 22 2009, 08:50 GMT