Daily Report: Dollar Recovering Mildly from Critical Support

Dollar and yen recovers mildly as Asian market opens the week in a calm way. Asian stocks are mildly lower on profit taking after Friday's strong rally. Dollar is supported by weakness in crude oil which saw it back below 81 level. Also, traders are holding their bets ahead of a number of market moving events this week, which starts with manufacturing data and from US later today, and followed by FOMC rate decision, BoJ meeting as well as BoE minutes.

As noted before, dollar index is now sitting at an important level which include a cluster support at 79.56 and trend line support at 79.79. We're still anticipating strong support from the current level to conclude the consolidation from 81.34 and bring rally resumption. However, though unlikely, strong break of 79.56 will complete a head and shoulder top which would bring accelerated selling to 78.45 support next.

Looking at other markets, crude oil is clearly losing upside moment in recent rise, as seen in bearish divergence conditions in 4 hours MACD and the rising wedge look of recent price actions. It's still a bit early to conclude the crude oil has topped. But we'd expect some deeper pull back sooner or later as the rebound from 69.50 makes a top around 83/84 level. And in that case, dollar would be benefited from pullback in oil and rebound.

On the data front, UK rightmove house price rose merely 0.1% mom in March. Japan house hold confidence improved slightly from 39 to 39.8 in February. Swiss combined PPI, US empire stat manufacturing index, industrial production and NAHB housing market index will be released later today.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 123.84; (P) 124.52; (R1) 125.35; More.

We're neutral in EUR/JPY for the moment as it's very close to mentioned 125.22 cluster resistance (38.2% retracement of 134.36 to 119.64 at 125.26). Choppy recovery from 119.64 is treated as a correction in the larger fall only and is expected to be limited by 125.22 cluster resistance and bring fall resumption. Below 123.01 minor support will flip intraday bias back to the downside for retesting 119.64 low first. However, decisive break of 125.22/26 will invalidate out view and indicate that stronger rebound is underway for 61.8% retracement of 134.36 to 119.64 at 128.73 next.

In the bigger picture, with 125.22 cluster resistance still intact, we're holding on the bearish view.That is, medium term rebound from 112.10, which is treated as a correction to long term down trend from 2008 high of 169.96, should have completed at 139.21 already, after multiple failure to sustain above 55 weeks EMA. Recent decline is expected to resume sooner or later to a new low below 112.10. However, note that decisive break of 125.22 cluster resistance will argue that recent fall might have completed already. Further break of 126.88 support turned resistance will argue that medium term rise from 112.10 might be still in progress for another high above 139.21 before completion.

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