Yen Climbs as Jobless Claims Rose, Dollar Steady

By IBTimes Staff Reporter | February 18 2010 6:41 PM

Yen rises in early US session after worse than expected jobless claim which rose back to 473k. Dollar remains firm, though, against European majors, supported by stronger than expected PPI reading which rose 1.4% mom, 4.6% yoy with core PPI up 0.3% mom, 1.0% yoy. Canadian dollar is trying to regain some ground after stronger than expected core CPI reading. Headline CPI rose 0.3% mom, 1.9% yoy in January, inline with expectation. Core CPI rose 0.1% mom, 2.0% yoy versus consensus of 0.0% mom, 1.9% yoy. Euro was soft against dollar and yen, as well as against commodity currencies. German Chancellor Angela Merkel slammed the scandal of banks helping Greece massage its deficit, saying the nation falsified its statistics for years.

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Following up on EUR/CAD, the cross dropped further to as low as 1.4170 in early US session. Current down trend is still in progress to 1.4 psychological level and then 100% projection of 1.7499 to 1.5183 from 1.6006 at 1.3690. A break above 1.4384 resistance is needed to be the first sign of stabilization or outlook will remain bearish.

Sterling fell in European session as UK posted first January deficit since at least 1993. Public sector net borrowing unexpected rose by GBP 4.3b versus expectation of -2.4b. The data raised concern that if the overshoot continued, the full-year forecast will be under threat and the deficit-to-GDP ratio could exceed 12.7% of Greece. M4 Money supply grew 0.6% mom, 5.1% yoy in January.

BoJ left rates unchanged at 0.1% by unanimous vote today as widely expected. BoJ noted that economy in Japan is picking up but there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand. Also, the bank noted that deflation is a critical challenge and pledged to maintain extremely accommodative financial environment. Nevertheless, no new measure was announced.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3529; (P) 1.3659; (R1) 1.3732; More.

At this point, intraday bias in EUR/USD remains on the downside and further decline is still expected. Break of 1.3531 support will confirm that recent fall has resumed and should target 61.8% retracement of 1.2329 to 1.5143 at 1.3404 and then 161.8% projection of 1.5143 to 1.4217 from 1.4578 at 1.3076 next. On the upside, above 1.3635 minor resistance will turn intraday bias neutral again. Also, note that break of 1.3788 resistance will indicate that a short term bottom is formed with bullish convergence condition in 4 hours MACD and RSI. Strong rebound should then be seen to 1.4025 resistance or above.

In the bigger picture, three wave rise from 1.2329 is treated as consolidation to fall from 1.6039 only and should have completed at 1.5143 already. Fall from 1.5143 is tentatively treated as resumption of the whole down trend form 1.6039 and should target a new low below 1.2329. Break of 1.4217 resistance is needed to be the first signal of medium term bottoming. Otherwise, outlook will remain bearish even in case of strong rebound.

EUR/USD