Daily Report: Dollar and Yen Back Under Pressure on Risk Appetite, Eyes on ECB

Dollar and yen are once again under pressure on broad based rally in Asian stock markets as risk appetites return where Nikkei rose sharply by 3.84% to close at day high of 9977. Fear of intervention continues to drive the yen down which helps lift stocks of Japanese exporters. Near term resistance in yen crosses are taken out in this week's rebound which the tide is turned and some more rebound would be seen.

Dollar is also under additional pressure from persistent strength in gold which made another record high of 1227.5 before retreating mildly. EUR/USD has resumed the rebound from 1.4828 and is set to retake on 1.5143 resistance. Dollar index is still bearish near term and should head to a test on 74.19 low sooner or later. While GBP/USD and AUD/USD are still holding on to 1.6744 and 0.9321 resistance, both levels are looking vulnerable and would probably be taken out soon too. Such develop would align the outlook back to other dollar pairs for a new low in the greenback in near term.

Main focus today will be on ECB announcement. While the main refinancing rate will be kept at 1%, the central bank will announce adjustments in the refinancing operations. The ECB staff will also publish economic forecasts which should have been upgraded. More in ECB Preview: Expect to see Adjustment in Tender Terms and Upgrades in Economic Outlook. Other data to be watched including finalized PMI services in Eurozone, Eurozone retail sales and Q3 GDP, UK PMI services, US ISM non-manufacturing index and jobless claims.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 144.13; (P) 144.93; (R1) 146.07; More

GBP/JPY's rise from 139.26 extends further to as high as 146.80 so far and the break of 146.30 support turned resistance dampens the immediate bearish view. Whole fall from 153.21 might have completed with three waves down to 139.26 already and sideway consolidation pattern from 139.69 is possibly still in progress with rise from 139.26 as the third leg. Further rise will now be expected as long as 143.77 support holds and GBP/JPY could possibly test 151.57/153.21 resistance zone before topping. On the downside, though, below 143.77 support will indicate that rebound from 139.26 has completed and will flip bias back to the downside for this support first.

In the bigger picture, there is no change in the bearish outlook so far. 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. Fall from 163.05 is tentatively treated as resumption of the long term down trend. Such decline should resume after finishing the consolidation pattern from 139.69 and should target a new low below 118.81 then. The bearish outlook will remain unchanged as long as 153.21 resistance holds.

Economic Indicators Update

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