The Japanese yen is broadly higher ahead of a number of event risks today. US banks will receive preliminary results of stress test today and Geithner is set to release the methodology of the tests. G7 will meet today with focus on mobilizing the agreed $750B fund to be allocated to the IMF as a means to help countries which are at risk of going bankrupt. In addition, there will be release of UK Q1 GDP and retail sales, German Ifo, US durables and new home sales.
While GBP/JPY is the biggest loser in the Asian session today, USD/JPY's dive worth most attention. technically speaking, the break of the trend line support in USD/JPY serves as an important indication that the medium term rebound has topped out at 101.43 already and affirm the bearish outlook in the pair. Topping signal has been seen in EUR/JPY and AUD/JPY earlier this month and focus will turn to GBP/JPY for further confirmation of the yen's medium term turn around.
The bullish outlook of dollar is under much pressure after developments in the last few days. Dollar index is back pressing 85 level after the selloff against Euro, Swissy and Yen and is set to test support zone of 84.51 and trend line at 84.95. The lack of impulsive look of the rise from 82.63 to 86.87 is opening up the possibility that medium term correction from 89.62 is still in progress. But the outlook against individual currencies are rather mixed. Against Sterling and Aussie, bottoming signal is clear. But the outlook in EUR/USD and USD/CHF is debatable No conclusion can be made for the moment and the fate will depend on whether 84.51 support could hold in dollar index.
On the data front, Japan's corporate service price index dropped -2.1% yoy in March, better than the -2.6% fall as expected by the market and in February. The all industry activity index declined -2% mom in February after sliding -1.7% in the previous month.
In Germany, the Ifo business climate probably edged slightly higher to 82.3 in April from 82.1. However, the index remains at very low level as the current conditions component should have plunged further. UK's GDP likely declined -1.5% qoq in 1Q09 following a contraction of -1.6% a quarter ago due to sharp fall in industrial production. On annual basis, the reading is expected to have dropped -3.8%, the weakest since 1981, after falling -2% in 4Q08. Decline in retail sales is anticipated to have stabilized, by falling -0.5% mom, in March after a sizable contraction of -1.9% in February.
Durable goods orders in the US are should have resumed recent downtrend by falling -1.5% in March, after a surprising +3.5% gain in the previous month. Excluding transportation, the reading would have slid -0.8% following at +3.9% rise in February. New home sales might have edged +0.9% mom higher to 340K units in the US in March. Despite this, sentiments for home-builders remained weak and the index probably would hover around low 300K in coming months.
USD/JPY Daily Outlook
Daily Pivots: (S1) 97.57; (P) 98.01; (R1) 98.38; More .
USD/JPY dives further to as low as 96.62 today so far and the strong break of trend line support at 97.45 is affirming the bearish case that whole medium term rebound from 87.12 has topped out at 101.43 already, slightly below 61.8% retracement of 110.65 to 87.12 at 101.66, on bearish divergence condition in daily MACD. Intraday bias remains on the downside as long as 97.53 minor resistance holds and further decline should now be seen towards 93.53 support for confirmation. On the upside, above 97.53 will turn intraday outlook neutral first and probably bring recovery. But upside should be limited by 98.90 resistance and bring fall resumption.
In the bigger picture, current development indicates that rise rebound from 87.12 has completed at 101.43 already. As mentioned before, USD/JPY is still holding below medium term trend line resistance at 102.63 and hence, the down trend from 124.13 (07 high) is still intact. Break of 93.53 support will confirm this case and bring retest of 87.12 low. On the upside, though above 101.43 high will invalidate this case and put focus back to the medium term trend line again.