Yen rallies across the board as China took another step to cool lending by raising bank reserve requirements . Dollar, on the other hand, continues to consolidate against major currencies as crude oil and gold retreats. In particular, crude oil seems to be topped out in near term at 83.95 after missing 84 mark and extends it's pullback from there to as low as 81.26 so far today. USD/CAD is, thus lifted to as high as 1.0366 before being pressured by USD/JPY selling.

Just after raising bill yields second time in a week, PBoC said it was raising reserve requirements ratio by 0.5 percent points which now clearly indicates that China is begging to tighten monetary policy. PBoC has just sold benchmark 1-year bill at 1.8434% today. Last week, PBoC raised yield on three-month bills to 1.3684%. These steps are viewed as sign that PBoC is getting more aggressive in draining cash from the money market to cool down overheat lending.

On the data front, US trade deficit came in widen than expected at -36.4B in November. Canada trade balance turned to CAD -0.3b deficit in November. UK trade deficit narrowed to GBP-6.784b in November. DCLG house price rose more than expected by 0.6% yoy in November. However, RICS house price balance unexpectedly dropped to 30% in December, suggesting that recovery in the UK housing market is probably losing momentum. Japan current account surplus narrowed to JPY 1.4T in November.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 91.71; (P) 92.18; (R1) 92.56; More.

USD/JPY's fall from 93.74 extends further to as low as 91.32 so far in early US session and at this point, intraday bias remains on the downside for 91.24 support. Break there will indicate that whole rally from 84.81 might have completed at 93.74 already, on bearish divergence condition in 4 hours MACD. Deeper decline should then be seen to 87.36 support for confirmation. On the upside, above 92.41 minor resistance will turn intraday bias neutral first. But risk will now remain on the downside as long as 93.74 resistance holds.

In the bigger picture, at this point, USD/JPY is still trading below medium term trend line resistance at 95.06 and 55 weeks EMA at 94.21. Hence, there is no clear indication of reversal yet. A break of 87.36 support will indicate that rebound form 84.81 has completed and the whole fall form 124.13 is possibly resuming for 1995 low of 79.75. However, note bullish convergence condition is seen in weekly MACD. Sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.