Daily Report: Yen Retreats, Aussie Rebounds as Markets Stabilize

Yen retreats mildly today with Asian stock markets stabilizes from yesterday's crash. South Korean, taiwan and Hong Kong reduced interest rates following the coordinated global rate cut yesterday which include Fed, ECB, BoE, BoC, Riksbank, SNB and PBoC. BoJ and RBA injected 4T yen and A$3.49b into the financial system. But after all, investors are not convinced that the rate cuts are enough to save the world economy from the worst crisis since the Great Depression. DOW struggled to keep it s gains and closed 2% down overnight after Treasury Paulson warned there could be more bank failures ahead. Nikkei 225 also failed to hold on to earlier gains and turned negative. Interest rates are pricing in over 90% odds that Fed will cut again this month even after yesterday's emergency 50bps cut.

The biggest mover in the forex markets today so far is the Aussie. AUD/USD rebounds strongly after yesterday's low of 0.6445 and reaches as high as 0.6982. AUD/JPY also rebounds strongly from 63.7 to as high as 70.42. But there is no change in bearish outlook in Aussie yet. Outlook in dollar and yen also remains bullish after all and more upside are still expected to be seen in both currencies. Dollar's strength is particularly apparent against Canadian dollar on falling oil prices. Sterling is also generally weak as the bailout plan announced yesterday failed to improve investors confidence.

A number of economic data are released today but the impact to markets are minimal. Japanese machine orders dropped more than expected by -14.5% mom, -13.0% yoy in Aug. Australian unemployment rated climbed to 4.3% in Sep as expected. Germany Trade Surplus narrowed to 10.6b. WPI dropped -0.6% mom in Sep with yoy rate moderated to 5.8%. UK Trade balance, US jobless claims and wholesale inventories will be released later today.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6341; (P) 0.6749; (R1) 0.7048; More

AUD/USD rebound strongly after diving to as low as 0.6445, just hitting mentioned target of 100% projection of 0.9849 to 0.7802 from 0.8519 at 0.6472. With 4 hours MACD crossed above signal line, an intraday low is in place. Outlook is turned neutral for the moment, with bias mildly on the upside for further consolidation/correction. However, upside is expected to be limited by 0.7361 resistance and bring fall resumption. On the downside, below 0.6655 minor support will flip intraday bias back to the downside for retesting 0.6445 low.

In the bigger picture, a long term top is in place at 0.9849 with bearish divergence condition in monthly MACD and RSI. Considering the corrective three wave structure of the multi year up trend from 0.4773 to 0.9849, it could represents a correction to multi decade down trend or part of consolidation. 61.8% retracement of 0.4773 to 0.9849 at 0.6712 is already taken out. Next medium term target is 76.4% retracement level at 0.5971. On the upside, medium term outlook will remain bearish as long as 0.7802 support turned resistance holds even in case of stronger than expected rebound.

Forex News Digest

• The Day Ahead Canada and U.S.: U.S. Initial Jobless Claims, Fed Speak
• The Day Ahead Europe and UK: German and UK Trade Balance, UK Housing Prices
• U.S. Preview: Jobless Claims to Continue Soaring in Week Ending October 4
• Treasury's Paulson Says Rescue Fund Will Inject Capital into Financial Institutions (Update)
• Markets Pricing in Additional 25bp Fed Rate Cut by October Meeting
• Asia-Pacific Market Recap: Equities Mixed, Aussie Up After G7 Banks Cut In Step
• No Bombshell News Out of the Australian Unemployment Report, Economists Say
• Australian unemployment rate rises to 4.3% in September 2008
• Foreigners Sold Japanese Bonds and Stocks in the First Week of October
• Japanese Machine Orders Surprise to the Downside in August
• Closing Market Recap: Epic Day of Swings and Surprises
• Wednesday's News Recap: World Central Banks Cut Rates
• Yen Falls as Global Interest Rate Cuts Boost Stocks, Revive Risk Appetite
• Asia Money Market Rates Rise as Banks Ignore Benchmark Borrowing Cost Cuts
• Pound May Fall to $1.7050 in Coming Days on Charts, Forecast's Ng Says
• Trichet Engineers `Regime Change' at ECB as Crisis Engulfs European Banks
• Australian, New Zealand Dollars Pare Losses as Central Banks Cut Rates

More Forex News

Economic Indicators Update

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