Markets are basically in a directionless mode with sentiments flip-flop between positive and negative. Pessimism in Asian markets faded in European sessions following a string of solid economic data from Eurozone and UK. However, optimism also fades in early US session after another batch of poor data from US and Canada. Dollar and yen are stuck in range against major currencies, except that noticeable strength in seen in Australian dollar.
Data from US saw initial jobless claims rose more than expected to 464k. Continuing claims, though, dropped -223k to 4.49m. Fed Chairman Bernanke will have the second part of the semi-annual testimony today. Also, existing home sales will be released. On the other hand, Canadian retail sales unexpectedly dropped -0.2% mom in May, with ex-auto sales down -0.1%.
Data from Europe were generally positive. Eurozone PMI manufacturing and services unexpectedly rose to 56.5 and 56 in July, signaling faster expansion. German PMIs were even more impressive with PMI manufacturing jumped to 61.2 while services PMI rose to 57.3. UK retail sales also rose more than expected by 0.7% mom in June.
AUD/JPY's consolidation from 71.86 is still in progress and more choppy sideway trading would likely be seen. We'd continue to avoid trading the cross inside current range of 71.86/80.85 and try to sell near to upper end of the range at 80.85. After all, we'd anticipate a break of 71.86 low to resume the whole decline from 88.04 and expect a test on 55.11 low in medium.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 86.77; (P) 87.14; (R1) 87.40; More.
USD/JPY recovers mildly ahead of 86.26 support but still, intraday bias remains cautiously on the downside for the moment. Break of 86.26 will confirm that recent decline has resumed and should target 84.81 key support level next. On the upside, above 87.56 will delay the bearish view and bring more consolidations. But after all, upside is expected to be limited well below 89.14 resistance and bring fall resumption.
In the bigger picture, the corrective three wave structure of the rise from 84.81 to 94.97 suggests that whole down trend from 2007 high of 124.13 is still in progress. Fall from 94.97 is tentatively treated as resumption of such down trend and should extend beyond 84.81 low. Break of 84.81 will target next key level of 79.75 (1995 low). On the upside, break of 89.14 resistance will indicate that fall from 94.97 is possibly completed and bring stronger rebound. However, note that break of 94.97 resistance is still needed to be the first sign of medium term reversal. Otherwise, we'll stay bearish.