Daily Report: Dollar and Yen Lower as Asian Stocks Surge

Market Overview | Written by ActionForex.com | Dec 08 08 06:16 GMT |

Dollar and yen are broadly lower today on a couple of factors. Following late rally in Friday's US stock markets, Asian markets are driven higher by anticipation of extending the $15b loans to GM and Chrysler. US president-elect Obama pledged on the biggest public works program in 50 years that involve creation of 2.5 millions jobs. Asia markets are additionally boosted after Reserve Bank of India slashed rate from 7.5% to 6.5% and the government announced a $4b stimulus package. Crude oil rebounded over 5% on news that OPEC will cut production sharply at its Dec 17 meeting. Aussie is the biggest winner today on returned risk appetite. On the data front, Japan's current account surplus in October dropped sharply to 960.5B yen from 1497.9 B yen in October, worse than consensus of 1094 B yen. The 8th consecutive decline was brought by 7.3% decrease in exports to 6.59 trillion yen and 8% increase in import to 6.45 trillion yen. Geographically, Japan's exports to the US were down 19% while that to the EU was down 17.2%. Later today, Japan will report November economic watch DI which should come in at 20 from 22.6 in October. Looking ahead, Eurozone's Sentix investor confidence for December should deteriorate further to -40 from -36.4 last month as disappointing economic data made investors worry about the economic outlook. Following a below-consensus decline of 3.6% in September, German industrial production should have contracted by another 1.5% in October. We believe manufacturing and industrial activities in Germany will remain weak over the next several months. ECB's Trichet will speak at European Parliament at 1400 GMT. In UK, large decline in oil price continued to suppress inflation and economists expect November PPI would have fallen to an annualized 4.4%. Input and output PPI should have plunged to 6.7% and 5.2% from 13.8% and 6.8%, respectively, year on year. Canada's housing starts in November is expected to have fallen to 194 K from 211.8 K in October. The market's focus for the nation is on tomorrow's BoC meeting which is expected to announce a 50 bp cut of interest rate to 1.75%. AUD/USD Daily Outlook Daily Pivots: (S1) 0.6330; (P) 0.6408; (R1) 0.6525; More AUD/USD's break of 0.6535 minor resistance confirmed that fall consolidation from 0.6619 has completed with three waves to 0.6292. In other words, rebound from 0.6075 is resuming and is targeting 100% projection of 0.6075 to 0.6619 from 0.6292 at 0.6836. On the downside, though, below 0.6292 will flip intraday bias back to the downside for retesting 0.6008/6075 support zone. After all, note that AUD/USD is still staying in converging range and price actions would remains choppy before a breakout. In the bigger picture, whole fall from 0.9849 has possibly completed the five wave sequence already, with the fifth wave ended at 0.6008. However, note that the impulsive nature of the fall from 0.9849 to 0.6008 indicate that price actions from 0.6008 is developing into correction/consolidation only. The long term down trend is still expected to resume after completing the consolidation. Sustained break of 0.6008 will indicate that the down trend from 0.9849 has resumed for at least another five wave medium term decline, targeting 0.4773 (01 low). But, note that as long long as 0.6008 low holds, consolidation from could still extend further. Above 0.7014 will target 38.2% retracement of 0.9849 to 0.6008 at 0.7475 before completing the consolidation.