Japanese yen, and to a lesser extent dollar, rebounds today on new rumors ahead of tomorrow's banks stress test results. Bank of America is speculated to be the most under-capitalized among the 19 largest bank in US and would be required by the government to raise $34b in new capital after the stress test. The figure is more than triples of any previously published reports about BofA's capital needs and is around half of its market cap. Markets are also concerned that uncertainty over banks won't end after the stress test results.

Released earlier in Asia, Australia's retail sales rose +2.2% mom in March , better than market expectation of +0.5% and -2% a month ago. Trade surplus also widened to AUD 2498M in March from a downwardly revised AUS 1752M in the previous month as decline in imports was faster than that in exports.

In the Eurozone, services PMI should have confirmed at 43.1 in April from 40.9 in March, while the reading for Germany also finalized at 43.5 from 42.3 in the previous month. Retail sales in the Eurozone is expected to have gained +0.1% mom in March after a -0.6% slide in February. On yearly basis, the gauge trimmed contraction to -2.6% from -4% in the previous month. In the UK, PMI for services sector is also expected to come in healthier than manufacturing sector. Services PMI probably rose to 46.2 in April from 45.5 in the previous month. BRC shop price index for April will also be reported later today. UK's Nationwide consumer confidence improved to 50 in April (consensus: 42, March: 42) as driven by less negative expectation of economic outlook and the job market in the coming 6 months.

Several employment data will be released in the US. ADP is anticipated to report 647K reduction in job while Challenger's survey should show further annual increase in job cut in April from 180.7% in March. Canada's building permits probably gained +2.5% mom in March after declining for 5 consecutive months, in particular a severe -15.9% drop in February. On the other hand, Ivey PMI may have plunged 2.7 points to 40.5 in April as the reading was not seasonally adjusted and has a tendency to fall during the month.

USD/JPY Daily Outlook

USD/JPY's fall from 99.57 extends further to as low as 97.36 today and at this point, intraday bias is mildly on the downside as long as 99.20 minor resistance holds and further decline is still in favor. Note that a break of 95.61 support will now be an important signal that whole rise from 87.12 has completed, probably in form of head and shoulder top (ls: 99.67, h: 101.43, rs:L 99.57). In such case short term outlook will be turned bearish. On the upside above 99.20 will flip intraday bias back to the upside. As discussed before, further rally to above 101.43 cannot be ruled out for the moment. But we'd maintain the view that upside potential is limited as strong resistance should be seen as USD/JPY approaches medium term trend line resistance at 102.27.

In the bigger picture, the down trend from 124.13 (07 high) is still intact. This is supported by the fact that USD/JPY is still struggling to take out 55 weeks EMA (now at 99.93 decisively). Bearish divergence condition in daily MACD and RSI are also indicating loss of upside momentum and suggest possibility of reversal. Hence, while further rise to above 101.43 cannot be ruled out, we'd expect strong resistance as USD/JPY approaches medium term trend line resistance at 102.27 and bring reversal. Break of 95.61 support will be an important indication that whole rebound from 87.12 has completed and should bring resumption of the down trend from 124.13 eventually.

However, note that sustained trading above the trend line resistance will argue that whole down trend from 124.13 has indeed completed already and should then put focus back to 110.65 resistance for confirmation.

USD/JPY