Mid-Day Report: Massive Carry Trade Comeback on Stock Rally

Market Overview | Written by ActionForex.com | Sep 19 08 13:52 GMT |

Carry trades finally make a massive come back on another as stock markets soars for another day. DOW opens sharply higher and reaches as high gain more than 400 pts following announcement of US Government's market rescue plan and banning of short selling of nearly 800 financial stocks. Yen crosses finally get out of hesitation and surged sharply across the board, confirming a short term reversal. While the greenback maintains strength in USD/JPY, it gives back earlier gains against other majors currencies as Euro, Sterling, Aussie and Canadian dollar are boosted in yen crosses. USD/JPY Mid-Day Outlook Daily Pivots: (S1) 104.36; (P) 105.07; (R1) 106.12; More. USD/JPY's rally from 103.54 extends further to as high as 108.02 in early US session and is now pressing 107.97 resistance. At this point, intraday bias remains on the upside as long as 106.63 minor support holds. Decisive break of 107.97 will confirm that decline from 110.66 has completed at 103.54 after drawing support form 103.76 support. In other wise, whole medium term rebound is possibly in still force and further rally should be seen to retest 110.66 high first. On the downside, below 106.63 will turn intraday outlook neutral. In the bigger picture, the failure to sustain below 103.76 support and subsequent strong rebound from there argues that fall from 110.66 is corrective in nature. In other words, medium term rebound from 95.77 might still be in progress. Break of 107.79 will affirm this case and bring retest of 110.66 high first. Break will confirm medium term rebound from 95.77 has resumed. However, once again, note bearish divergence condition in daily MACD and USD/JPY is still limited below 55 days EMA. Break of 103.76 will revive the case that medium term rebound from 95.77 has completed at 110.66. 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.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
22:45	NZD	New Zealand Current account (nzd) Q2	-3.19B	-3.50B	-2.16B	-2.11B
5:00	JPY	Japan Leading indicators Jul F	91.4	91.6	91.6
6:00	EUR	Germany PPI M/M Aug	-0.60%	-0.40%	2.00%
6:00	EUR	Germany PPI Y/Y Aug	8.10%	8.40%	8.90%