Yen rebound strongly today while dollar follows. Positive sentiments fade after disappointment from Germany Ifo business climates and dovish comments from BoE King. Buying of yen intensified after disappointing consumer confidence reading from US. Yen is also lifted as speculation for a Fed hike in near term cooled. Dollar on the other hand, is helped by sharp fall in crude oil which sent it back from intraday high of 80.39 to below 79 level. Data from US saw S&P/Case-Shiller 20 cities home price rose for second consecutive months by 0.3% mom in December, down -3.1% yoy. Conference Board consumer confidence dropped sharply to 10 month low of 46 in February.

Sterling was knocked down earlier today by dovish comments from BoE Governor Mervyn King. In front of a parliamentary committee today, King said that UK's economic recovery is fragile and also, recovery in our largest export market -- the euro area -- appears to have stalled. King also noted that despite depreciation of Sterling, exports didn't get a lift. King hinted that quantitative easing may have to be restarted if the economy deteriorates.

Euro, on the other hand, was sent lower against dollar as German Ifo business climate unexpected dropped to 95.2 in February versus expectation of a rise to 95.8. Ifo President Hans-Werner Sinn said retailers experienced a setback in February and construction activity is being strongly constrained by the weather conditions. Nevertheless, economic recovery is expected to continue when winter is over. Swiss Franc also weakened earlier today possibly on SNB intervention but the bank declined to comment.

Dollar index's strong rebound today argues that retreat from 81.34 might have completed at 80.09 already. Intraday bias is cautiously on the upside for retesting 81.34 first. Break will confirm rally resumption to next resistance level at 82.36. Meanwhile, in case of another fall, outlook will remain bullish as long as 79.56 cluster support holds (38.2% retracement of 76.60 to 81.34 at 79.52). Recent rally is in favor to resume sooner rather than later.


GBP/JPY Mid-Day Outlook

Daily Pivots: (S1) 140.50; (P) 141.34; (R1) 141.90; More

GBP/JPY's break of 140.70 minor support suggests that recovery from 138.23 might have completed at 143.59 already. Intraday bias is flipped back to the downside for 138.23 first. Break will confirm that recent decline has resumed and should target 61.8% retracement of 118.81 to 163.05 at 135.70 next. On the upside, above 141.70 minor resistance will delay the bearish case and bring more consolidations. But after all, upside is expected to be limited by 145.26 resistance and bring fall resumption.

In the bigger picture, medium term rebound from 118.18, which is a correction to the long term down trend from 07 high of 251.90, has completed at 163.05 already. Decline from 163.05 is tentatively treated as resumption of the long term down trend from 2007 high of 251.09 and should target a new low below 118.81. On the upside, break of 150.68 resistance is needed to invalidate this view. Otherwise, outlook will remain bearish.