The Japanese yen rises sharply as the week starts, boosted by anti-intervention comments from Japanese Finance Minister Hirohisa Fujii as well as steep decline in Nikkei 225 index. Fujii said over the week end that recent rise in yen is not abnormal... in terms of trends and it would be a mistake to artificially influence foreign exchange rates. It echoed his recent comments that he doesn't support a weak yen and reinforced markets's expectation that the government will not intervene to curb yen's gain. Nevertheless, yen pared some gains after Fujii then said today after the opening surge in yen that currency move are becoming one-sided.
Yen is also additionally supported by the sharp fall in Japanese Nikkei 225 which breached 10000 level briefly today. Note that today's fall has sent the index through medium term trend line support which in turn suggests that whole rebound from March low of 7021 has completed at 10767 already. Bearish divergence conditions in daily MACD is support this bearish case too. Next focus will be on whether the index would sustain below 10000 level in near term and should then target next key level at 9000 in Q4. Yen will continue to be supported by risk aversion.
GBP/JPY continued to be the weakest pair today but other yen crosses are catching up. EUR/JPY has already broken 131.00 support and confirmed resumption of fall from 138.70. AUD/JPY dived to as low as 76.50 and recovers mildly ahead of 76.38 support. Note that the three wave consolidation from 76.38 has completed at 80.03 and fall fro 81.98 should be resuming. In addition, medium term trend line support is strongly broken which indicates that AUD/JPY has topped out at 81.98 already, with bearish divergence condition in daily MACD.. We'd anticipate further fall towards 70.74 key support going ahead.
While, USD/JPY spiked lower to as low as 88.23, dollar is indeed supported elsewhere by the strength in yen. EUR/USD has taken out 1.4611 support and confirmed a near term top is at least in place at 1.4842. Dollar index's break of 77.09 resistance indicates that it has bottomed out at 75.83 after drawing support from key level of 75.89. Though, there is no follow through buying yet. Nevertheless, we'd remain cautiously bullish on dollar index as long as 76.50 minor support holds and expect stronger rally towards 78.93 on sustained trading above 77.09 resistance. Break of 78.93 will confirm that whole five wave fall from March high of 89.62 has completed and will confirm the bullish view. However, a break below 76.50 will dampen this case and turn outlook neutral again first.
GBP/JPY Daily Outlook
Daily Pivots: (S1) 141.55; (P) 144.12; (R1) 145.51; More
GBP/JPY's fall accelerated to as low as 139.72 so far today and met mentioned target of 50% retracement of 118.81 to 163.05 at 140.93 as expected. Intraday bias remains on the downside for the moment and sustained trading below 140.93 will pave the way to 61.8% retracement at 135.70 next. On the upside, above 143.15 minor resistance will turn intraday outlook neutral and bring consolidation. But recovery should be limited below 149.01 support turned resistance and bring fall resumption.
In the bigger picture, prior break of 146.75 key support completed a double top reversal pattern (162.56, 163.05). This affirms our view that medium term rise form 118.81, which is treated as correction the larger down trend from 07 high of 251.90, has completed at 163.05 already, after failing to sustain above 55 weeks EMA. Fall from 163.05 is tentatively treated as resumption of the long term down trend and should now target a new low below 118.81. On the upside, break of 153.22 is needed to invalidate this bearish view. Otherwise, outlook will remain bearish.