Dollar is trying to recover against Euro and Swiss in early US session after release of better than expected new residential construction data. Housing starts rose more than expected to 591k annualized rate in January while building permits dropped to 621k but was above expectation of 620k. NAHB index released yesterday also showed improvement to 17 in February. Industrial production also rose more than expected by 0.9% in January. The greenback is helped by strong rally in USD/JPY and pared some of this week's loss against Euro and Swissy. Nevertheless, it's still soft against commodity currencies. Focus now turns to FOMC minutes to be released later today.


BoE minutes released today showed policy makers voted unanimously to pause the GBP 200b asset purchase program this month. The vote suggested that unless there are signals of substantial deterioration in the economy, BoE is likely done with quantitative easing. Job market data from UK showed claimant counts rose by 23.5 in January, much worse than expectation of -10k drop. It took the total number of workers claiming Job seeker's Allowance to 1.64 million, the highest since April 1997. Unemployment rate was unchanged at 7.8% in February.

We'd like to point out again the Euro is still underperforming commodity currencies in the current risk appetite moves in the markets. EUR/AUD dropped further to as low as 1.5179 so far today and is still on course to 100% projection of 2.0385 to 1.7145 from 1.8098 at 1.4858.


Euro's weakness helps supporting dollar index due to it's heavy weighting. The dollar index drew support from 79.57 and recovers strongly today. As long as this support level holds, we'd continue to expect recent rally to resume sooner rather than later. A break above 80.22 will flip intraday bias back to the upside for retesting 80.75 resistance. However, break of 79.75 will indicate that deeper correction is underway towards 78.45 medium term support before staging another rise.


USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 89.87; (P) 90.05; (R1) 90.19; More.

USD/JPY's rebound from 88.57 accelerated today and reached as high as 91.09 so far. Further rise could still be see. But after all, we'd still expect fall from 93.74 to continue as long as 91.26 resistance holds. BElow 90.13 minor support should flip intraday bias back to the downside for 88.57 support and then 87.36. However, decisive break of 91.26 will invalidate the bearish view and suggest that rise from 84.81 is still in progress for another high above 93.74.

In the bigger picture, the whole down trend from 124.13 should still be in progress even though downside momentum is seen diminishing in bullish convergence condition in weekly MACD. We'd continue to extend more decline in USD/JPY and break of 84.81 should target 1995 low of 79.75. Strong break of 93.74 resistance and sustained trading above 55 weeks EMA (now at 93.50) are needed to invalidate this view. Otherwise, outlook will remain bearish.