The sharp rally in US stocks overnight provided little support to Asian equities. Nikkei dropped another -1% after coming back from holiday on concern that Japanese banks will need to replenish capitals and the Weakness in Nikkei halted yen's retreat. More importantly, further selling is found after China stocks reversed and dropped sharply on news that China banking regulators are raising capital requirements of banks to temper their rapid growth in lending. Further selling in yen crosses is seen as markets enter into European session and the greenback is also lifted mildly by yen.

Even after yesterday's rebound, yen crosses are generally kept below key near term resistance levels and thus, there is practically no change in the bearish outlook. Major currencies are dragged down by weakness in respective yen crosses and pare yesterday's gain against dollar. GBP/USD and AUD/USD are kept well below last week's high and thus retain the bearish outlook that they have topped out in near term at least. Similarly, USD/CAD is also held well above 1.0416 level, which retains the near term bullish outlook. The tricky parts remain in EUR/USD and USD/CHF which choppy price actions are still giving us a mixed picture.

The China Banking Regulatory Commission said that banks are discouraged to engage in any extra push to lending before the end of the year warned banks with low capital adequacy ratios that no practical remedies for the problem will prevent them from expanding their businesses. Nevertheless, the commission denied the rumor that capital adequacy ratios will be raised from 11% to 13%. Bank of China and ICBC said it's studying various options to replenish capital. INdustrial Bank said it's planning to raise 18b Yuan.

Japanese Finance Minster Fujii said that monetary policy plays a significant role to combat deflation. He expressed his support to Deputy Prime Minister (Naoto) Kan's stance that the government would exchange views and find a solution with the BOJ.

On the data front, German GDP was finalized at 0.7% qoq in Q3. Swiss UBS consumer indicator rose to 0.87 in October. Looking ahead, German Ifo business climate is the main focus in European session and is expected to rise from 91.9 to 92.5 in November. US GDP will be the main focus in US session and is expected to be revised lower from 3.5% to 2.9% annualized in Q3. House price index and Consumer confidence and FOMC Minutes will also be featured.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 146.74; (P) 147.47; (R1) 148.46; More

GBP/JPY's sharp fall today indicates that recovery from 146.30 might have completed at 148.20 already. Intraday bias is cautiously on the downside this week. Break of 146.30 will confirm that fall from 153.21 has resumed and should target 144.51 support next. Also, as noted before, whole rebound from 139.69 should have completed at 153.21 already. Hence, further decline is expected to have a test on 139.69 eventually. On the upside, above 148.20 will turn bias neutral again and bring more consolidations. But after all, upside is expected to be limited well below 150.30 resistance and bring fall resumption.

In the bigger picture, the bearish outlook remains unchanged. That is, medium term rebound from 118.18, which is a correction to the long term down trend from 07 high of 251.90, has completed with a double top reversal pattern (162.56, 163.05). Fall from 163.05 is tentatively treated as resumption of the long term down trend and should target a new low below 118.81 after completing the rebound from 139.69. We'll hold on to the bearish view as long as 61.8% retracement of 163.05 to 136.69 at 154.12 holds


Economic Indicators Update

23:00AUDConference Board Leading Index Sep0.30%--1.80%1.50%
5:00JPYBoJ Monthly Report ---- 
7:00EURGerman GDP Q/Q Q3 F0.70%0.70%0.70% 
7:00CHFUBS Consumption Indicator Oct0.87--0.630.67
8:15CHFEmployment Level Q3 3.936M3.945M 
9:00EURGerman IFO - Business Climate Nov 92.591.9 
9:00EURGerman IFO - Expectations Nov 97.396.8 
9:00EURGerman IFO - Current Assessment Nov 8887.3 
10:00EUREurozone Industrial New Orders M/M Sep 1.00%2.00% 
10:00EUREurozone Industrial New Orders Y/Y Sep -17.30%-23.10% 
13:30USDGDP (Annualized) Q3 P 2.90%3.50% 
13:30USDCore PCE Q/Q Q3 P 1.40%1.40% 
13:30USDGDP Price Index Q3 P 0.80%0.80% 
14:00USDS&P/Case-Shiller Composite-20 Y/Y Sep -9.20%-11.32% 
15:00USDConsumer Confidence Nov 47.547.7 
15:00USDHouse Price Index M/M Sep 0.10%-0.30% 
19:00USDFOMC Meeting Minutes ----