After being sold off sharply over night on risk appetite, Japanese yen is regaining some ground in Asia after BoJ left rates unchanged and decided to phase out the emergence measures for tackling financial crisis. The committee decided to let the corporate debt buying programs expire the year end. Commercial paper and corporate bond purchases will end as scheduled. Unlimited collateral-backing lending will be extended for one more time through March 31. The bank noted in the accompanying statement that financial environment is showing signs of improvements and the bank will maintain extremely accommodative financial environment for some time by holding interest rates at their current low levels and providing ample funds sufficient to meet demand. Data from Japan was mixed though. Unemployment rate expectedly dropped to 5.3% in September. But household spending rose less than expected by 1.0% yoy. Housing starts also dropped slightly more than expected by -37%. CPI dropped more than expected by -2.2%.
Yen's sharp fall overnight has somewhat dampens the immediate bullish case for further rally. Nevertheless, while the rebound was strong, yen crosses are generally holding below recent highs. We're still maintain the mild bearish outlook in yen crosses and expect more downside to come. Looking at AUD/JPY, a short term top should at least be in place at 85.30 with 4 hours MACD crossed below signal line. Considering bearish divergence conditions in daily MACD, whole medium term rise from 55.53 might have completed at 85.30 too after missing 85.76/86.12 cluster resistance (61.8% projection of 55.53 to 80.43 from 70.74 at 86.12, 61.8% retracement of 104.46 to 55.54 at 85.76). Further fall should be seen to lower trend line support at 78.34 to confirm this case.
Elsewhere, dollar is also stabilizing from yesterday's selloff. So far, the greenback is still holding well above near term low against European majors and commodity currencies. Dollar index is now trying to draw support from 4 hours 55 EMA (now at 75.84). While another fall cannot be ruled out, we'd expect downside to be contained by 75.56 support and bring another rise. As noted before a short term bottom should at least be in place. Above 76.57 will bring rally resumption to test 77.47 resistance next.
The economic calendar is rather busy today. German retail sales, Eurozone CPI flash, unemployment and Swiss KOF will be released in European session. US personal income and spending, CHicago PMI, U of Michigan sentiment, employment cost index and Canadian GDP will be released in US session.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 132.43; (P) 134.21; (R1) 135.16; More.
EUR/JPY's strong rebound from 132.79 reached 135.97 but lost momentum since then. Intraday bias is turned neutral for the moment. On the upside, above 135.97 will indicate that rise from 132.79 is still in progress and will turn bias to the upside for further rise to retest 138.74 resistance first. On the downside, however, a break of 133.93 minor support will indicate that rebound from 135.97 has completed and will flip bias back to the downside for 61.8% retracement of 129.02 to 138.47 at 132.62. Decisive break there will set the stage for deeper fall to retest 129.02 next.
In the bigger picture, price actions from 137.38 are treated as consolidation to medium term rebound from 112.10. Recent development argues that such consolidation is possibly still in progress. But after all, medium term rebound from 112.10 is still in favor to continue as long as 129.02 support holds. Though a break of 139.21 key resistance is needed to confirm resumption of this medium term rebound. On the downside, however, firm break of 129.02 will revive the case that medium term rebound from 112.10 has completed already and will turn outlook bearish for a retest of this low next.
Economic Indicators Update
|23:30||JPY||Unemployment Rate Sep||5.30%||5.60%||5.50%|
|23:30||JPY||Household Spending Y/Y Sep||1.00%||1.20%||2.60%|
|23:30||JPY||National CPI Y/Y Sep||-2.20%||-2.00%||-2.10%|
|23:30||JPY||National CPI Core Y/Y Sep||-2.30%||-2.30%||-2.40%|
|23:30||JPY||Tokyo CPI Core Y/Y Oct||-2.20%||-2.10%||-2.10%|
|0:01||GBP||GfK Consumer Confidence Survey Oct||-13||-14||-16|
|3:05||JPY||BoJ Interest Rate Decision||0.10%||0.10%||0.10%|
|5:00||JPY||Housing Starts Y/Y Sep||-37.00%||-36.90%||-38.30%|
|7:00||EUR||German Retail Sales M/M Sep||1.00%||-1.50%|
|7:00||EUR||German Retail Sales Y/Y Sep||-2.20%||-2.60%|
|10:00||EUR||Eurozone CPI Estimate Y/Y Oct||-0.10%||-0.30%|
|10:00||EUR||Eurozone Unemployment Rate Sep||9.70%||9.60%|
|10:30||CHF||KOF Leading Indicator Oct||1.12||0.85|
|12:30||CAD||GDP M/M Aug||0.10%||0.00%|
|12:30||USD||Personal Income Sep||0.10%||0.20%|
|12:30||USD||Personal Spending Sep||-0.50%||1.30%|
|12:30||USD||PCE Deflator Y/Y Sep||-0.50%||-0.50%|
|12:30||USD||PCE Core M/M Sep||0.20%||0.10%|
|12:30||USD||PCE Core Y/Y Sep||1.30%||1.30%|
|12:30||USD||Employment Cost Index Q3||0.40%||0.40%|
|13:45||USD||Chicago PMI Oct||48.1||46.1|
|14:00||USD||U. of Michigan Confidence Oct F||70||69.4|