Daily Report: Yen Intervention Talk Builds Up

Market Overview | Written by ActionForex.com | Oct 27 08 07:06 GMT |

The dollar is building up some strength after a rather quiet Asian session. The Japanese yen also strengthens mildly with Japanese falling over 6% to a 26 year low. While there isn't any change in dollar and yen's up trend, the development of the relative strength in the near term should be noted as there are increasing concern over yen's strength from world leaders. G7 finance ministered issued a joint statement late Sunday, expressing the concern on volatility in yen's exchange rate and its possible "adverse implications for economic and financial stability." Japanese Finance Minister Nakagawa pledged the government will act if needed. Other stories of the financial crisis continue. IMF reached a tentative agreement to aid Ukraine with $16.5b in loans and the agreement with Hungary is close. Bank of Korea slashed rates by 75bps to 4.25%, the largest ever cut, after an emergency meeting over the weekend. RBA confirmed that they had bought AUD on Friday night at around 0.6130 with to "add liquidity in an illiquid market". Looking ahead, main focus in the European session will be Germany Ifo business climate and Eurozone M3 Money supply. New Home sales from US will be released later in the US session. Last Friday's better than expected Existing Home Sales provided some support to the US stock markets but the impact could be easily undone by a worse than expected figure today. AUD/USD Daily Outlook Daily Pivots: (S1) 0.5923; (P) 0.6336; (R1) 0.6625; More AUD/USD's is back pressing Friday's low of 0.6056 and at this moment, intraday bias remains on the downside as long as 0.6334 minor resistance holds. Further decline is expected to next long term fibonacci level of 76.4% retracement of 0.4773 to 0.9849 at 0.5971 first. Break will target 100% projection of 0.8519 to 0.6330 from 0.7237 at 0.5048 next. On the upside, above 0.6334 will turn intraday outlook neutral and bring consolidation. But rebound should be limited below 0.6760 resistance and bring down trend resumption. In the bigger picture, the strength of the fall from 0.9849 strongly suggests that it's developing into an impulsive fall in at least the same degree as the up trend from 0.4773 to 0.9849. The current interpretation is that first wave of such fall has completed at 0.7802. Second wave correction has completed at 0.8519 and fall from there should represents the third wave decline. The question now is whether consolidation from 0.6330 represents the fourth wave consolidation of such decline. But in either case, medium term outlook will remain bearish as long as 0.6760 resistance holds even in case of stronger rebound. However, above 0.6760 will argue that fall from 0.9849 has completed the five wave sequence already. In other words, a medium term bottom is probably formed in this case and larger scale consolidation/rebound could be seen. Though, upside is till expected to be limited below 0.7802 support turned resistance and another medium term down trend in this case.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	Japan CSPI Sep	0.10%	1.20%	1.40%
9:00	EUR	Germany Ifo Business Climate Oct		91.8	92.9
9:00	EUR	Eurozone M3 Money Supply Y/Y		8.50%	8.80%
14:00	USD	U.S. New home sales Sep		0.46M	0.46M
14:00	USD	U.S. New homes change Sep		-1.30%	-11.50%