Yen Recovers But Dollar Remains Soft

 @ibtimes
on February 22 2010 5:08 PM

Yen recovers earlier today as strength in Asian equities was not followed through in European session. The Japanese currency was also supported by speculation of Chinese yuan revaluation later this year to cool inflation. Euro remains firm even though the rumor of a EUR 25b rescue plan for greece was denied. Also, there is little impact from George Soro's comment that the survival of Greece would still leave the future of the euro in question, ..... and if member countries cannot take the next steps forward, the euro may fall apart. Dollar, on the other hand, remains generally soft as crude oil and gold continue to hover around 80 and 1120/30.

Talking about yen, outlook is still rather mixed for the moment. Yen's up trend against European majors are still intact. However, the stronger than expected rebounds in AUD/JPY and CAD/JPY leave much doubt in yen's ability to regather momentum for another rise. Though, one thing to note is that NZD/JPY is somewhat lagging being other commodity yen crosses. NZD/JPY is still limited by 55 days EMA as well as 64.66 resistance and hence, for the moment, we're treating rebound from 60.45 as correction only. We'd still favor more downside in NZD/JPY going forward.

Looking back at dollar index, pull back from 81.34 is still in progress and some more consolidations could be seen below 81.34. However, as noted before, short term trend should still be bullish as long as 79.56 support holds and recent rally is in favor to resume sooner rather than later to next target at 82.63 resistance. However, a break of 79.56 cluster support (38.2% retracement of 76.60 to 81.34) will indicate that a short term top is formed with bearish divergence condition in 4 hours MACD and RSI. In such case, deeper correction would be seen towards 78.45 support turned resistance instead.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0704; (P) 1.0801; (R1) 1.0852; More.

USD/CHF stabilizes a bit after hitting 4 hours 55 EMA but there is not sign of completion of retreat from 1.0897 yet. Intraday bias remains neutral and some more consolidations could be seen below 1.0897. Nevertheless, another rise is still in favor as long as 1.0646 support holds. Sustained trading above medium term trend line resistance (now at 1.0864) swill pave the way to 161.8% projection of 0.9916 to 1.0506 from 1.0131 at 1.1086 next. However, considering bearish divergence condition in 4 hours MACD and RSI, break of 1.0646 support will indicate that a short term top is formed and will bring deeper pull back towards 1.0506 resistance turned support first.

In the bigger picture, medium term correction from 1.2296 should have completed with three waves down to 0.9916 already. Current rise from 0.9916 is tentatively treated as resumption of the long term up trend from 2008 low of 0.9634. Sustained break of mentioned medium term trend line resistance (now at 1.0864) will further affirm this view. In such case, we'd be looking at stronger rise to 1.1963/2296 resistance zone in medium term. On the downside, break of 1.0131 support is needed to invalidate this bullish view. Otherwise, another rise is still expected even in case of deep pullback.

USD/CHF

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