Sterling weakens broadly today on poor production data from UK. Industrial production dropped -0.4% mom, -1.5% yoy in January while manufacturing production dropped -0.9% mom and rose 0.2% yoy. Investors remain concerned with the momentum of recovery, fiscal deficit as well as political uncertainty in UK. BoE MPC member Adam Posen said that he hoped the bank is done with quantitative easing, but the comment offered little support to Sterling.

On the other hand commodity currencies are generally strong. Australian dollar rode on strong trade data from China. Chinese exports rose an impressive 45.7% in February, well past expectations, after another strong jump of 86% in January. Imports rose 44.7% and trade surplus narrowed to $7.61b. The sustained strength in China's trade is a source of support for global economy. As the top buying of Australia's exports and strong demand of commodities, it was particularly important in keeping Australia away from recession during the economic crisis. More in RBNZ to Hold Monetary Policy Unchanged. Focus on the Quarterly MPS

New Zealand dollar is also firm ahead of RBNZ rate decision. The RBNZ will likely leave the OCR at 2.5%, for the 11th month, at the March meeting. Therefore, the market will focus on the Monetary Policy Statement as well as how the central bank describe economic outlook. On the whole, we expect the RBNZ will deliver a neutral tone, if not slightly more dovish than January's, on the outlook as economic data released in recent weeks were rather mixed. The post- meeting statement should retain the reference that 'we would expect to begin removing policy stimulus around the middle of 2010'.

Elsewhere, dollar remains bounded in tight range against Euro, but yen is noticeably weaker. On the data front, Australia westpac consumer confidence rose 0.2% in March. Japan domestic CGPI dropped -1.5% yoy in February. Machine orders dropped -3.7% mom, -1.1% yoy in January. German trade surplus narrowed to EUR 8b in January. February CPI was revised up to 0.4% mom, 0.6% yoy.

Back to sterling's weakness, GBP/CAD dropped further to as low as 1.5270 today as the down trend continued. Outlook in the cross remains bearish as long as 1.5612 resistance holds and we'd expect more decline to 100% projection of 1.9299 to 1.6233 from 1.7890 at 1.4824 next.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 89.62; (P) 89.97; (R1) 90.32; More.

USD/JPY rebounded strongly after drawing support from 4 hours 55 EMA but it's still limited below 90.68 resistance. Intraday bias remains neutral and more consolidations could still be seen. However, another rise would be mildly in favor as long as 89.19 minor support holds. Above 90.68 will bring rise resumption towards near term falling trend line (now at 91.48). On the downside, note that further break of 89.19 will argue that rebound from 88.13 is over and will flip intraday bias back to the downside for retesting this support instead.

In the bigger picture, with 87.36 support intact, there is no confirmation that rise from 84.81 is finished. Also, stronger than expected rebound from 88.13 mixed up the outlook in USD/JPY. We'd stay neutral for the moment. On the upside, break of 92.14 resistance will confirm that whole decline from 93.74 has completed with three waves down to 88.13 already. The corrective structure will in turn indicate that rise from 84.81 is still in progress for another high above 93.74. On the downside, break of 88.13 will reaffirm the bearish case that rise from 84.81 is completed at 93.74 already and will turn focus to 87.36 support for confirmation.

USD/JPY