The forex markets are steadily in range as the week starts since most Asian markets are on Chinese new year holiday. Japanese Preliminary Q4 GDP released today saw stronger than expected growth in Q4, by 1.1% qoq, 4.6% annualized versus expectation of 0.9% qoq, 3.5% annualized. However the broad measure of prices, GDP deflator, fell at a record 3% yoy, showing that deflationary pressures persist in the economy and there is increasing need for a policy response from BoJ, which will meet later this week. Japanese stocks are down today as the positive GDP growth data was somewhat outweighed by last week's surprise hike in bank reserve requirement from China.

EU finance ministers will meet today and markets are hoping for some concrete measures, best with a number, for the Greece rescue plan. Investors are clearly dissatisfied with the lack of details, but just a pledge from EU last week and EUR/USD was sold to a new low as down trend continued. As German Finance Minister Schaeuble said last week, aid to Greece could go beyond loan guarantees. But Prime Minister Merkel might be facing tremendous political pressure for offering financial help. The meeting of EU finance ministers might yet be another disappointment to the markets.

UK Rightmove house price index rose 3.2% mom in Feb, 6.1% yoy in February, the best reading since April 2007. Nevertheless sterling has little reaction to the data and focus will be on CPI, employment, money supply and retail sales data last this week, as well as BoE minutes. BoE is expected to keep rates unchanged at historical low of 0.5% throughout 2010. And there are still change of more quantitative easing should data shows persistence deterioration in the economy.

The economic data is very light today with US and Canada markets on holiday too. Swiss combined PPI will be featured and is expected to rise 0.2% mom, drop -1.5% yoy in January.

Looking at the dollar index, while upside moment is no too convincing, further rise is still expected as long as 79.57 support holds. Break of 100% projection of 74.19 to 78.45 from 76.60 at 80.86 will pave the way to further rally to medium term resistance at 82.63. On the downside, however, break of 79.57 will indicate that a short term top is formed and deeper pull back might than be seen towards 76.60/78.45 support zone instead.

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EUR/JPY Daily Outlook

Daily Pivots: (S1) 121.64; (P) 122.36; (R1) 123.36; More.

At this point, intraday bias in EUR/JPY remains cautiously on the downside for 120.69 support first. Break will confirm that recent fall from 134.46 has resumed and should target 100% projection of 134.36 to 124.73 from 126.96 at 117.33 next. On the upside, however, above 123.10 minor resistance will delay the bearish case and argues that more sideway consolidations would be seen first. Nevertheless, even in case of another rise, upside should be limited by 124.73/126.96 resistance zone and bring another fall.

In the bigger picture, medium term rebound from 112.10, which is treated as a correction to long term down trend from 2008 high of 169.96, should have completed at 139.21 already, after multiple failure to sustain above 55 weeks EMA. Current decline is tentatively treated as resumption of the down trend and should target a new low below 112.10. On the upside, break of 126.88 support turned resistance is needed to be the first signal of bottoming. Otherwise, medium term outlook will remain bearish.

EUR/JPY