Daily Report: Yen and Dollar Remain Soft as Asian Stocks Rally

Yen, and to a lesser extent dollar remain soft as Asian stocks open the week high with Nikkei up sharply by over 2%. Canadian dollar and Australian dollar are so far the biggest winner this month with CAD/JPY up nearly 4% while AUD/JPY up 3.3% so far. The were talks in the market that buying in Canadian dollar overtook Australian dollar on safety of the country's banking system as well as its tie to US economic recovery. Also, the pace of Aussie's rally might be limited by China's tightening measures going forward. Options demand for AUD/CAD short reached highest month in almost a year. Technically, we've mentioned that we're near term bearish in AUD/CAD and prefer Loonie over Aussie. However, the tricky point is on whether USD/CAD would hold on to 1.0205/0223 support zone. We'll probably clear the picture after job reports from Australia and Canada later this week.

Nevertheless, both Aussie and Loonie are strong against yen in near term. CAD/JPY's strong rebound from 83.15 suggests that further rally might be seen to test upper side of medium term range at around 90.57 level. It's possibly that triangle consolidation from 89.36 is already finished with five waves to 83.15. But still a strong break of 90.57 resistance is needed to confirm Otherwise, we might see CAD/JPY lose steam again after hitting 90 level.

On the data front, Japan current account surplus widened to JPY 1.71T in January. Eco watcher survey improved to 42.1 in February. Swiss unemployment rate was unchanged at 4.10% in February. Retail sales is expected to grow 2.3% yoy in January. Eurozone Sentix Investor Confidence is expected to drop to -8.8 in March. German industrial production is expected to rise 1.0% mom in January. Canadian housing starts is expected to drop slightly from 186.3k to 186.0k in February.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.9009; (P) 0.9051; (R1) 0.9117; More

AUDUSD rises further to as high as 0.9111 today and at this point, intraday bias remains on the upside. Current rally from 0.8577 is still expected to continue towards 100% projection of 0.8577 to 0.9070 from 0.8802 at 0.9295 next. on the downside, below 0.8977 support will indicate that a short term top is in place and bring consolidation. But after all, break of 0.8802 support is needed to indicate that rise from 0.8577 is finished. Otherwise, another rise would still be expected.

In the bigger picture, the sustained trading above 55 days EMA (now at 0.8975) suggests that correction from 0.9404 has completed with three waves down to 0.8577 after hitting medium term rising channel support as well as 23.6% retracement of 0.6008 to 0.9404. In other words, whole rally from 0.6008 might be set to resume for another high above 0.9404. If we treat the rise from 0.8577 as the fifth wave in the rise from 0.6008 with equal length as the first wave from 0.6008 to 0.7267, upside target will be 0.9836, which is close to 2008 high of 0.9849. On the downside, break of 0.8802 support is needed to be the first signal to revive the case that AUD/USD has already topped out. Otherwise, we'll remain cautiously bullish in AUD/USD.

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