Yen reversed earlier gains as Europeans stocks managed to rebound strongly after initial weakness. More pressure is seen on the yen as US equities are set to open higher on positive earnings. One more point to note is that 12 month dollar Libor breaks above 1% for the first time this year as markets are betting that Fed will finally start normalizing rates by the end of the year. USD/JPY is back trading above 94 level after diving to as low as 92.81 yesterday. Weakness in yen is also helping other major currencies to recover against the greenback.

Euro also managed to recover on speculations that IMF will increase their loan to Greece, from EUR 15b to EUR 25b. ECB President Trichet and IMF Managing Director Strauss-Kahn are in Berlin today to brief German parliamentary leaders on the aid package. Markets are keening looking forward to German Chancellor Merkel's statement later today on the Greece situation.

Yield on Greece two year notes jumped to a record 26bps today while spread between 10 year bonds and German bunds surpassed bps. CDS on Greece jumped breaks 900 bps. Markets are still in deep concern on the Greece situation and Euro will remain pressured until we hear something positive from Germany today.

Sterling tumbles sharply earlier today after BoE Besley said that the US economy remained in a fragile state until we've seen a run of data that support the idea that we're on a road to recovery.

FOMC rate decision will be the next focus. Fed is expected to keep its Fed funds rate unchanged at 0-0.25% today and we do not see the Fed will remove the language for the time being. Rather, policymakers will revise up economic assessment despite warning employment situation. More in Fed to Upgrade Economic Assessment and Keep 'Exceptionally Low Rate', 'Extended Period' Language.

We expect RBNZ to keep the OCR at 2.5% in the upcoming Asian session. The RBNZ has guided in prior post-meeting statement that it would 'begin removing policy stimulus around the middle of 2010' since April 2009 with brief modification in December. As we approaches 'the middle of 2010', we are interested to see if the central bank will make any change to the sentence. In our opinion, the RBNZ will change it to a conditional statement, saying a rate hike in coming months depending on economic data and inflation outlook. More in RBNZ to Leave Rates Unchanged at 2.5%, May Change the 'Middle of 2010' Statement

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 92.71; (P) 93.37; (R1) 93.93;

USD/JPY's fall was contained at 92.81 and rebounds strongly. Intraday bias remains neutral for the moment. Note that on the upside, decisive break of 94.68 resistance will confirm that whole rally from 88.13 has resumed and should target 100% projection of 84.81 to 93.74 from 88.13 at 97.06 next. Before that, we might see more sideway consolidations first. Below 92.81 will bring another fall but after all, we'd expected downside to be contained by 91.59 support to conclude the consolidation from 94.68 and bring rally resumption.

In the bigger picture, current development suggests that whole down trend form 124.13 is completed at 84.81 on bullish convergence condition in daily MACD and RSI. We'd expect stronger rally towards 101.43/65 medium term resistance zone for confirming this bullish case. On the downside, break of 88.13 support is needed to indicate that rebound from 84.81 is finished. Otherwise, outlook will remain bullish.

USD/JPY

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised

23:50
JPY
Retail Trade Y/Y Mar
4.70%
3.60%
4.20%
 

1:30
AUD
CPI Q/Q Q1
0.90%
0.80%
0.50%
 

1:30
AUD
CPI Y/Y Q1
2.90%
2.80%
2.10%
 

1:30
AUD
CPI RBA Trimmed Mean Q/Q Q1
0.80%
0.60%
0.60%
 

1:30
AUD
CPI RBA Trimmed Mean Y/Y Q1
3.00%
2.90%
3.20%
 

1:30
AUD
CPI RBA Weighted Median Q/Q Q1
0.80%
0.70%
0.70%
 

1:30
AUD
CPI RBA Weighted Median Y/Y Q1
3.10%
3.00%
3.60%
 

3:00
NZD
NBNZ Business Confidence Apr
49.5
--
42.5
 

14:30
USD
Crude Oil Inventories
 
0.9M
1.9M
 

18:15
USD
FOMC Interest Rate Decision
 
0.25%
0.25%
 

21:00
NZD
RBNZ Interest Rate Decision
 
2.50%
2.50%
 

--
EUR
German CPI M/M Apr P
 
0.20%
0.50%
 

--
EUR
German CPI Y/Y Apr P
 
1.20%
1.10%