Daily Report: Yen Remains Pressured, Continues to Decouple from Risk Aversion

Market Overview | Written by ActionForex.com | Feb 24 09 07:58 GMT |

Yen remains pressured in an otherwise steady forex market today even though Asia stock markets tumble following weakest close in US stocks since 1997. USD/JPY climbs further to as high as 95.23 today and is trading above key near term resistance of 94.61. Opinions on whether USD/JPY has bottomed are divided but it's looking likely that 87.12 is a medium term bottom as the Japanese currency continue to decouple from risk aversion. Yen crosses are generally higher too. Dollar retreats mildly from yesterday's rebound but after all, since the dollar index should now be in sideway consolidation, the greenback is expected to remain relatively directionless in short term. Focus will turn to Germany Ifo, House prices indices and consumer confidence from US as well as Bernanke's Testimony. Outlook in the Dollar Index remains unchanged. A short term top is formed at 88.24, below 88.46 high after rise from 77.69 completed five wave sequence. Subsequent price actions should be corrective in nature and could extend lower towards 83.58 support. But downside should be contained there and bring rally resumption that eventually push the dollar index through 88.46 high. February Germany's Ifo business climate is expected to come in at 83, same reading as January, and remain close to record low of 82.7 in Dec. Businesses generally remain very pessimistic about the economic outlook despite the ECB's rate cut and the German government's announcement of a second fiscal stimulus. In the Eurozone, current account deficit is expected to have narrowed to 5.3B euro in December after widening to 6-month low of -13.9B euro a month ago. Although decline in exports should have remained weak, it should be outpaced by the sharp fall in imports. Industrial orders probably slid further by 5% mom in December, as driven by weaker domestic demand and falling exports, after a 4.5% decline a month ago. On annual basis, the reading should have been down 22.1% after slumping 26.2% in November. In the UK, CBI distribution trade is anticipated to have plunged to -52 in February after falling to -47 a month ago. Home price in the US should remain in downtrend with S&P/CS Composite HPI likely showed steeper deflation of -18.3% in December (November:-18.2%) as inventory levels in the composite regions, especially in San Francisco, Los Angeles and Las Vegas, were still high. Meanwhile, US house price index would have slid by another 1.8% mom in December as brought by frozen credit conditions, lower household wealth and rising unemployment. Consumer confidence surveyed by the Conference Board is expected to have dropped to all-time low of 35.5 in February due to surging unemployment. Fed Bernanke will start the two days testimony today. The information to be revealed today may be similar to those released last week in the FOMC minutes and the revised growth, inflation and unemployment projections. Nevertheless, markets would look into any elaboration on Fed's stance on the adoption of inflation targets as well as Fed's plan on quantitative easing. Released earlier in Japan, CSPI dropped 2.2% yoy in January, the 4th consecutive decline since October 2008, after falling 2.5% in December. USD/JPY Daily Outlook Daily Pivots: (S1) 93.26; (P) 94.10; (R1) 95.45; More. USD/JPY's rally is still in progress and reaches as high as 95.32 today so far. At this point, intraday bias remains on the upside as long as 94.11 minor support holds. Further rally could now be seen towards 38.2% retracement of 110.65 to 87.12 at 96.10. As discussed before, sustained trading above 94.61 will complete a double bottom formation and will turn USD/JPY's outlook bullish. Break of 96.10 fibo resistance will add more weight to this case. On the downside, below 94.11 will turn intraday outlook neutral first. Further break of 92.25 will suggest that rise from 87.12 has possibly completed and revive the original bearish case. In the bigger picture, current development argues that USD/JPY has completed a double bottom reversal pattern (87.13, 87.12). Break of above mentioned 96.10 fibo resistance will add further weight to this case and bring stronger rebound towards medium term falling trend line resistance (now at 104.22). On the downside, though, below 92.25 will revive the case that rise from 87.12 is merely part of consolidation that started at 87.13. Focus will then turn back to 86.69 support for confirmation. Forex News Digest The Day Ahead UK & Europe: German Ifo Business Climate The Day Ahead U.S. and Canada: Bernanke Speaks, U.S. Consumer Confidence U.S. Preview: Bernanke Testimony to be Closely Watched for Inflation Target U.S. Preview: U.S. Consumer Confidence Forecast to Hit Fresh Record Low EU Preview: German Business Sentiment Expected to Remain Stable in February Closing Market Recap: U.S. Stocks Fall to 11-Year Low Monday's News Recap: Canadian Retail Sales Plunge, Obama to Halve Deficit Yen Falls to 12-Week Low Against Dollar as Currency's Haven Allure Weakens Australian, N.Z. Dollars Fall as Stock Slump Damps Demand for Higher Yield German Business Confidence May Hold Steady as Stimulus Measures Weighed More Forex News Economic Indicators Update GMT Ccy Events Actual Consensus Previous Revised 23:50 JPY BOJ minutes Jan 23:50 JPY Japan CSPI Jan -2.20% -2.50% -2.50% 9:00 EUR Germany Ifo Business Climate Feb 83 83 9:00 EUR Eurozone Current account (euro) Dec -5.3B -13.9B 10:00 EUR Eurozone Industrial orders M/M Dec -5.00% -4.50% 10:00 EUR Eurozone Industrial orders Y/Y Dec -22.10% -26.20% 11:00 GBP U.K. CBI distribution trade Feb -52 -47 14:00 USD U.S. S&P/CS Composite-20 HPI y/y Dec -18.30% -18.20% 15:00 USD U.S. Conference Board Consumer confidence Feb 35.5 37.7 15:00 USD U.S. House price index M/M Dec -1.80% -1.80% 15:00 USD U.S. House price index Y/Y Dec N/A -8.70% 15:00 USD Fed Bernanke Testifies Before Senate