Yen tumbled sharply overnight as DOW manages to extend recent rally and closed above 10000 mark for the second consecutive day at 10062.9. Crude oil's again to 78.17 also added some pressure to the Japanese currency. On the other hand, even though there is practically no change in the dollar's down trend, the near term outlook is mixing up a bit. The greenback didn't bother much with the strength and crude oil and indeed turned sideway against Euro and Canadian dollar even though rally in GBP/USD and AUD/USD persist.

Talking about yen, current weakness on risk appetite would likely continue for a while. USD/JPY extended the rebound from 88.00 and indicates that a short term bottom is at least formed. AUD/JPY is so far the strongest yen cross this week and has already met mentioned target of 61.8% projection of 70.74 to 91.98 from 76.32 at 82.26. The current rally will likely extend further to cluster resistance of 85.60/86.12 (61.8% projection of 55.53 to 80.43 from 70.74 at 86.12 and 61.8% retracement of 104.46 to 55.11 at 85.60) before making a top.

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One of the main focus today is Canadian CPI. The Canadian dollar is boosted by speculations that may hike earlier than originally expected after data last week showed unemployment rate dropped sharply from 8.7% to 8.4% in September. Nevertheless, the Loonie lost some steam this week even though crude oil extended recent rally to new 2009 high. Today's CPI report is expected to show headline inflation to dropped further to -0.9% yoy in September while core inflation is expected to slow to 1.4% yoy. Any upside surprise today would likely trigger rally resumption in the loonie.

Looking at EUR/CAD, there is no change in the view that whole choppy down trend from 2008 high of 1.7499 is still in progress. We'd expected test on 1.5183 low in near term first with prospect of falling further to long term fibonacci level of 61.8% retracement of 1.3285 to 1.7499 at 1.4895.

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Other data to be released today include Swiss retail sales, Eurozone Trade Balance, US TIC capital flow, industrial production and U of Michigan consumer sentiment.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.6061; (P) 1.6179; (R1) 1.6388; More

GBP/USD's rally extended further to as high as 1.6398 before treating mildly. At this point, intraday bias remains on the upside and further rise could still be seen to outer trend line resistance at 1.6465. Below 1.6212 minor support will turn intraday outlook neutral first and bring consolidation. Focus will turn to 1.5919 support for indicating that rebound from 1.5706 has completed.

In the bigger picture, bearish outlook remains unchanged. Prior break of 1.6111 support confirmed the case that GBP/USD has topped out in medium term by completing a head and shoulder top reversal pattern (ls: 1.6742, h: 1.7043, rs: 1.6740). Also, note that medium term rise from 1.3503 is treated as a correction in the long term decline from 2.1161 and should have completed too. Medium term outlook is turned bearish and the current fall from 1.7043 is tentatively treated as resumption of the long term down trend, which should target a new low below 1.3503 eventually.

On the upside, however, break of 1.6740 resistance will indicate that fall from 1.7043 has completed already. The three wave structure will in turn suggests that it's merely a correction to the medium term rise from 1.3503 only, which is not completed yet.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
07:15CHFRetail Sales Y/Y Aug 0.80%1.00% 
09:00EUREurozone Trade Balance Aug 4.9B6.8B 
11:00CADCPI M/M Sep 0.10%0.00% 
11:00CADCPI Y/Y Sep -0.90%-0.80% 
11:00CADBoC CPI Core M/M Sep 0.20%0.10% 
11:00CADBoC CPI Core Y/Y Sep 1.40%1.60% 
13:00USDNet Long-term TIC Flows Aug 30.1B15.3B 
13:15USDIndustrial Production Sep 0.10%0.80% 
13:15USDCapacity Utilization Sep 69.70%69.60% 
13:55USDU. of Michigan Confidence Oct P 73.573.5