Dollar and Yen Pare Gains as Stocks Recover

Dollar and yen pare earlier gains as European stocks rise while US stocks higher. Major European equity indices are rising 1 to 2%. S&P 500 recovers from Friday's loss and regains 1050 handle on news of takeover activities in drug and technology industries in US. Crude oil and oil are staying in tight range above last week's low of 65 and 985 respectively. Dollar index is back below 77 level while yen crosses are consolidating in tight range. With no important economic data scheduled, markets may continue to consolidate for the rest of the session.

The Japanese yen opened the week sharply higher, boosted by anti-intervention comments from Japanese Finance Minister Hirohisa Fujii as Fujii said over the weekend 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.

On the data front, German CPI dropped more than expected by -.4% mom, -0.3% yoy in September, steeper than expectation of -0.2% mom, -0.1% yoy. UK home track house price rose most in two years by 0.2% mom, -5.6% yoy in September.

Looking at the dollar index, the recovery was limited at 77.25 and retreated. The break of 77.09 resistance argues that a short term bottom is at least formed at 75.83 on bullish convergence conditions in 4 hours MACD. But the bullish view is not totally convincing yet as there is so far no follow through momentum. Nevertheless, further rise is still in favor as long as 76.5 minor support holds. Above 77.25 will target 78.93 resistance first. On the downside, below 76.50 minor support will turn intraday outlook neutral again and put focus back to 75.83 low.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4629; (P) 1.4676; (R1) 1.4738;

EUR/USD recovers after falling to 1.4564 but still, intraday bias remains on the downside with 1.4724 minor resistance intact. As noted before, prior break of 1.4611 support indicates that a short term top is at least in place at 1.4842, with bearish divergence condition in 4 hours MACD. Further decline is now expected to be seen to 1.4446 resistance turned support next and break will target key support level at 1.4177. On the upside, however, break of 1.4724 minor resistance will dampen this immediate bearish view and turn outlook neutral first.

In the bigger picture, rise from 1.2456 is the third leg of the medium term consolidation pattern that started at 1.2329 and should be close to completion, with the current rise as the fifth wave in the five wave sequence from 1.2456. Such rise is expected to be limited by 1.4867 key resistance. Break of 1.4177 support will be an important signal that EUR/USD has already topped out and break of 1.3747 support will be the confirmation. In such case, deeper decline should be seen that sends EUR/USD through 1.2329 low eventually.

EUR/USD

Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
23:15AUDRBA Governor Stevens Speaks to Senate Committee in Sydney ---- 
14:30EURECB President Trichet Speaks ---- 
16:55CADBoC Gov Carney Speaks ---- 
--EURGerman CPI M/M Sep P-0.40%-0.20%0.20% 
--EURGerman CPI Y/Y Sep P-0.30%-0.10%0.00%