Market Overview | Written by ActionForex.com | Sep 17 08 07:13 GMT |

Daily Report: Yen Crosses Rebounds Further on AIG Bailout Yen crosses rebounds strongly following the news of AIG's bailout. Fed will take a 79.9% stake and will lend up to $85billion to AIG. Fed said in the statement that a "disorderly failure" of AIG could magnify the strains on financial markets, lead to higher borrowing costs and reduce household wealth. The loan is expected to be repaid with the proceeds from the sale of AIG's assets. Indeed, stock markets were unaffected by the disappointment that Fed held rates unchanged at 2.00% on anticipation of the bailout of AIG and ended up higher overnight. Yen's selling started with stocks rebound after FOMC decision. Defying the drastic change of market expectation this week, Fed left federal fund rates unchanged at 2.00% overnight and issued a rather neutral statement. In the accompanying statement, Fed acknowledged that "strains in financial markets have increased significantly and labor markets have weakened further." Several factors, including tight credit conditions, ongoing housing contraction and slowing in export growth will "weigh on economic growth" over the "next few quarters". But the fed is still confident that the "substantial easing" and "measures to foster market liquidity" will promote moderate economic growth. Regarding inflation, Fed expects inflation to moderate later this year and next even though outlook remains highly "uncertain". The more important point to note is that this decision was done by the first unanimous vote in nearly a year. Fisher, who dissented by preferring a hike last time, also voted for no change. Fed is moved to a neutral stance on current uncertainty in the financial markets. BoJ left rates unchanged at 0.5% as widely expected. In the accompanying statement, BoJ noted that energy prices and weak experts is keeping the economy sluggish but growth will return to a moderate path once commodity price stabilize and global economies improve. Inflation will remain high for months before moderating. UK data will take center stage in European session today. BoE minutes is expected to reveal a three way split in voting to keep rates unchanged in last meeting. Employment data is expected to show claimant count rising to 22.3k in Aug. Unemployment rate is expected to be unchanged at 5.4% in Jul. Housing data will be the main focus in US today with building permits and housing starts both expected to drop further in Aug. USD/JPY Daily Outlook Daily Pivots: (S1) 103.98; (P) 105.18; (R1) 106.83; More. USD/JPY's strong rebound from 103.54 and touching of 106.40 turns outlook neutral again. Nevertheless, note that USD/JPY is still kept below 4 hours 55 EMA. 4 hours MACD and RSI are still trending down. Hence the bearish case is still in favor. Below 105.14 minor support will turn intraday bias back to the downside for 103.54 low first. Sustained break of 103.76 will confirm that whole medium term rebound from 95.77 has completed at 110.66. Further decline should then be seen ed to retest this low. however, a break above 107.97 will invalidate this case and bring stronger rise towards 110.66 high. In the bigger picture,whole medium term rebound from 95.77 should have completed with at 110.66 with bearish divergence condition in daily MACD. Sustained break of 103.76 support will confirm this case. Also, note the three wave structure of the rise from 95.77 to 110.66 argues that it's merely a correction in the larger down trend. Hence, in such case, deeper medium term decline should be seen to retest this 95.77 low. On the upside, though, above 107.97 resistance will invalidate the bearish view, indicating firstly that correction from 110.66 has completed, secondly, whole medium term rally from 95.77 is still in progress despite the brief break of trend line support. In such case, retest of 110.66 high should be seen first.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
0:30	AUD	Australia Westpac leading economic indexJul	0.20%	N/A	0.10%
4:00	JPY	BOJ rate decision	0.50%	0.50%	0.50%
8:30	GBP	BOE MPC Vote outcome(C-U-H)		1--7--1	1--7--1
8:30	GBP	U.K. Claimant count Aug		22.3K	20.1K
8:30	GBP	U.K. Avg. earnings 3m Y/Y Jul		3.40%	3.40%
8:30	GBP	U.K. ILO unemployment rate Jul		5.40%	5.40%
9:00	CHF	Swiss ZEW index Sep		N/A	-79.6
9:00	EUR	Eurozone Trade balance (euro) Jul		-3.0B	-0.1B
10:00	GBP	U.K. CBI industrial trend Sep		-13	-13
12:30	USD	U.S. Current account (usd) Q2		-180.0B	-176.4B
12:30	USD	U.S. Building permits Aug		0.93M	0.94M
12:30	USD	U.S. Building permits M/M Aug		N/A	-17.70%
12:30	USD	U.S. Housing starts Aug		0.95M	0.97M
12:30	USD	U.S. Housing starts M/M Aug		N/A	-11.00%
14:35	USD	Crude Oil Inventories		-3.5M	-5.9M