Mid-Day Report: Markets Steady after US GDP Report

Market Overview | Written by ActionForex.com | Oct 30 08 13:35 GMT |

Markets are rather steady after today's Q3 advanced GDP release from US. Q3 GDP shrank -0.3%, the largest contraction since 2001 but was better than expectation of -0.5. Personal consumption had the first decline since 91 and dropped -3.1%, much worse than expectation of -1.9%. Jobless claims was unchanged at 479k. Dollar index recovers mildly after being supported by 83.18 support earlier today. Gold and Oil also soften mildly from earlier high today. Dow, on the other hand, is up around 200 pts in initial trading. As discussed before, short term bias in dollar and yen will likely remain bearish for a while but after all, the current pull back in dollar and yen is treated as a correction, or part of the correction, in a larger down trend even though such correction could extend longer and deeper. BoE ultra dove Blanchflower said earlier today that UK interest rates need to fall "significantly" and "quickly" or UK will face a relatively "deep and long-lasting recession." Blanchflower expects UK output to contract in 08 and 09. Inflation would then be below 1% and even negative. Japanese Government announced a new 5T yen stimulus package which includes 2T yen in financial assistance to consumers along with tax cuts and loan guarantee for small businesses. IMF will introduce a new lending facility of up to $100b to aid developing countries. Economic data released today saw Canadian PPI dropped -1.2% mom, rose 8.0% yoy in Sep. Eurozone business climate deteriorated to -1.3 in Oct while Economic sentiment dropped sharply to -24. Germany unemployment rate unexpectedly dropped to 7.5% in Oct. UK natural wide house price fell faster by -14.6% yoy in Oct. Focus will now turn to BoJ rate decision tomorrow. While it's generally expected that BoJ will be on hold at 50%, there are some speculations that BoJ could indeed cut by 25bps. USD/JPY Mid-Day Outlook Daily Pivots: (S1) 95.73; (P) 97.71; (R1) 99.36; More. USD/JPY is still staying in tight range below 99.68 in early US session. While the intraday upside momentum is diminishing mildly, further rise is still in favor as long as 94.23 minor support holds. As discussed before, the stronger than expected rise and break of 97.91 support turned resistance mixed up the near term picture. Focus is now on 103.06 cluster resistance (61.8% retracement of 110.66 to 90.92 at 103.12). On the downside, below 94.23 will indicate that rebound from 90.92 has completed and will bring retest of this low. In the bigger picture, stronger than expected rebound from 90.92 mixed up the near term picture. Nevertheless, as long as 103.06 cluster resistance holds, medium term outlook remains bearish. Prior break of 95.77 low confirms that whole down trend from 124.13 has resumed and should target 100% projection of 124.13 to 95.77 from 110.66 at 82.3 next. Also, note that the current development clears out the long term picture too. Price actions that started from 79.75 (95 low) has completed in form of a triangle that needed with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which could extend further to retest 79.75 low. On the upside, sustained break of 103.06 cluster resistance will firstly argue that fall from 110.66 has completed. Secondly, it will also argue that a medium term low is in place at 90.92 and outlook will be turned neutral with focus back to 110.66 high.