After being pressured for most of the day on rebound in Asian and European stocks, the Japanese yen is trying to fight back in early US session after jobless claims and headline durable goods orders from US disappoint the markets. Dollar remains steady in range against European majors and retreats against commodity currencies. Euro got little support from generally positive confidence indicators released today and remains soft. Meanwhile, Sterling continues to benefit from selling in EUR/GBP and rebounds against dollar and yen.

Headline durable goods orders in US showed merely 0.3% growth in December comparing to consensus of 2.0%. Ex-transport orders, though, came in better than expected at 0.9% comparing to consensus of 0.3%. Jobless claims once again fail to moderate much and remains elevated at 470k. Released earlier today, Eurozone economic confidence, industrial confidence and services confidence posted improvements in January but consumer confidence was unchanged at -16. Germany unemployment rate climbed to 8.2% in January, inline with expectation. Japanese retail sales posted 16th consecutive months of decline by -0.3% yoy in December.

As noted before, while upside momentum is a bit unconvincing in the dollar index, further rise is still expected as long as 78.35 minor support holds. Current rise should target target 61.8% projection of 74.19 to 78.45 from 76.60 at 79.23 next. However, break of 78.35 support will argue that a short term top is at least formed and deeper pull back should be seen to below 78.03 support.

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EUR/JPY Mid-Day Outlook

Daily Pivots: (S1) 125.50; (P) 125.94; (R1) 126.66; More.

EUR/JPY's recovery from 125.22 was limited at 127.06 so far and weakens again in early US session. Intraday bias remains neutral for the moment, as sideway consolidation might continue. Nevertheless, even in case of another rise, upside is expected to be limited by 128.35 resistance and bring fall resumption. Below 125.22 will target 124.35 support and then 100% projection of 138.47 to 126.88 from 134.36 at 122.77 next.

In the bigger picture, the break of 126.88 support revives that case that medium term rebound from 112.10, which is treated as correction to long term down trend from 169.96, has completed last year at 139.21. Break of 124.35 support will further affirm this case. By then, we'll expect such long term down trend to resume for a new low below 112.10. On the upside, break of 134.36 resistance is needed to invalidate this bearish view and suggest that EUR/JPY is still in consolidation to rise from 112.10 only. Otherwise, outlook will remain bearish.

img class=hand onload=resizeImg(this,450) src=http://www.actionforex.com/images/stories/contributors/actionforex/eurjpy20100128b.gif border=0 alt=EUR/JPY 4 Hours Chart />