Risk aversion dominates the markets as global stocks pay little attention to upgraded forecasts from OECD and weaken broadly. Japanese yen is the biggest winner with persistent strength seen today. Dollar also followed as gold dips to 1133 but subsequent recovery in gold but dollar buys are still hesitating to send the dollar index through near term resistance as Gold recovers in early US session. Aussie and Kiwi are the biggest losers in risk averse sentiments as usual with NZD/JPY dropping over -2.5%.

Today's sharp fall in AUD/JPY suggests that fall from 85.30 is resuming and should take the cross through 80.14 support in near term. We'd continue to favor the case that AUD/JPY has topped out at 85.30 in medium term on bearish divergence condition in daily MACD, just ahead of cluster resistance level around 86. Key focus will now be on 76.23 support for confirmation. ALso, this would be an important indication of the start of carry trade unwinding, which would give additional boost to yen and dollar.

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The Organization for Economic Cooperation and Development raised growth forecast for 2010 from 0.7% to 1.9%. US growth is projected to be 2.5%, up from 0.9%. Eurozone growth is expected to be 0.9% versus 0%. Japan growth is forecast to be 1.8%, up from 0.7%. For 2011, global growth is projected to be 2.5%. OECD acting chief economist Jorgen Elmeskov said there are now numbers that support a recovery in motion.

Data from US saw jobless claims steady at 505k. Canadian leading indicators rose 0.7% in October. Wholesale sales rose 0.2% mom in September. UK retail sales rose 0.4% mom in Oct, below expectation of 0.5% mom. Nevertheless, prior month's figure was revised sharply up from 0.0% mom to 0.4% mom. Annual rate beat expected by rising 3.4% thanks to upward revision in Oct from 2.4% to 2.9%. Public Sector Net borrowing dropped less than expected to GBP 11.4B in October.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 89.05; (P) 89.26; (R1) 89.52; More.

USD/JPY's break of 88.73 confirms that whole decline from 92.31 has resumed. Intraday bias remains on the downside and further fall should be seen to 88.00 support first. Break will bring medium term down trend resumption to 87.12 low. On the upside, above 89.13 minor resistance will turn intraday bias neutral and bring consolidations before staging another fall.

In the bigger picture, the bearish outlook remains unchanged. Fall from 101.43 is treated as resumption of the whole down trend from 124.13. Break of 87.12 low will confirm resumption of this down trend and should target next key level of 1995 low at 79.75. However, note that break of 92.31 resistance will firstly suggest that fall from 97.77 has completed. Additionally, this will raise the possibility that whole decline from 101.43 has finished with three waves down to 88.00 after meeting 100% projection of 101.43 to 91.73 from 97.77 at 88.07. The three wave structure will in turn indicate that rise from 87.12 is going to resume. Further break of 97.77 will target a retest of 101.43 instead.

USD/JPY