Dollar is slightly firmer today on rumors that Iran central bank began the process to reduce euro reserves from 55% to 20-25% and convert them to dollar and gold. The first stage of sales has started, which involves selling of 15b euros and is expected to be completed by September 22. The whole sales would amount to EUR 45b. Iran is expected to substantially decrease its oil sales in euros. While the greenback is slightly higher, buying is so far weak and dollar is basically staying in tight range against other major currencies.

On the other hand, yen remains generally soft today after Prime Minister Yukio Hatoyama announced his resignation. The announcement came just weeks before Upper House election on July 11. Current Finance Minister Naoto Kan is seen as the most likely successor to Hatoyama and has stated clearly his preference for a weaker yen. And markets expect that if he does become prime minister, there would be more verbal, and possibly actual intervention to curb yen strength.

On the data front, planned layoff in US dropped -65% yoy in May, according to report from Challenger, Gray & Christmas Inc. Eurozone PPI rose 0.9% mom, 2.8% yoy in APril UK PMI construction was slightly better than expected at 58.5 in May. Swiss retail sales rose 1.3% yoy in April. Australia GDP rose 0.5% qoq, 2.7% yoy in Q1. Japan monetary base rose 3.7% yoy in May.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 90.50; (P) 90.98; (R1) 91.41;

USD/JPY's rebound from 88.97 is still in progress and further rise would still be seen. But after all, price actions from 88.25 are viewed as consolidative in nature. Hence, we'd expect upside to be limited below 93.62 resistance and bring another fall. On the downside, below 90.53 minor support will indicate that recovery from 88.97 is finished and flip intraday bias back to the downside for 88.13/25 support zone.

In the bigger picture, considering that USD/JPY failed to sustained above 55 weeks EMA and dropped sharply, we're now slightly favoring the case that down trend from 124.13 is not over. Break of 88.13 support will indicate that rebound from 84.81 has completed with three waves up to 94.97 already. The corrective structure will affirm the bearish case and pave the way to a new low below 84.81. On the upside, however, break of 94.97 will revive the case that 84.81 is already the long term bottom and will target 101.43/65 medium term resistance zone for confirming this bullish case.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised 23:50 JPY Monetary Base Y/Y May 3.70% 2.80% 2.90% 01:30 AUD GDP Q/Q Q1 0.50% 0.60% 0.90% 1.10% 01:30 AUD GDP Y/Y Q1 2.70% 2.60% 2.70% 07:15 CHF Retail Sales Y/Y Apr 1.30% 3.70% 4.50% 4.00% 08:30 GBP PMI Construction May 58.5 58 58.2 09:00 EUR Eurozone PPI M/M Apr 0.90% 0.70% 0.60% 09:00 EUR Eurozone PPI Y/Y Apr 2.80% 2.60% 0.90% 11:30 USD Challenger Job Cuts Y/Y May -65.1% -- -71.10% 14:00 USD Pending Home Sales M/M Apr 6.00% 5.30%