Mid-Day Report: Yen Gains in a Day of Weak Economic Data

The Japanese yen seems to be the biggest winner in a day of weak economic data from US and UK. US conference board consumer confidence dropped sharply from upwardly revised 65.9 to 62.3 in Apr. Released in from US, S&P Case-Shiller home price index continued its sharp decline in Feb. Both the 10-city and 20-city composite indices recorded annual falls in excess of -12%. Yen's strength is seen all over the board. Though, the greenback does manage some gains against Euro, Sterling and Aussie.

Pound was sent sharply lower over the board in European session. CBI distributive trades report hit a shockingly low reading of -26 in April comparing to expectation of -3, down from March's +1. Mortgage approvals fell to the lowest level in nine years. In the Treasury Committee hearing, BoE King said that the bank is likely face "major challenges" in monetary and financial stability and it's a "difficult balancing act" in setting interest rates while economic growth slows and inflation is accelerating.

Kiwi remains pressured after New Zealand trade balance unexpectedly turned to -50m deficit in March from prior 258m surplus. Prior driver was the contraction in exports from 3.71b to 3.44b.

BoJ will announce rate decision in the coming Asian session and is widely expected to leave rates unchanged at 0.50%.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 103.89; (P) 104.36; (R1) 104.63; More.

USD/JPY's fall from 104.82 continues in early US session and break of 103.75 minor support confirms that an intraday top is in place. Intraday bias is flipped back to the downside for lower channel support (now at 101.90). Note that another rise to 104.96/108.59 resistance zone as long as this channel support holds. However, break will be the first signal that whole corrective rebound from 95.77 has completed and will put focus back to 100.02 support.

In the bigger picture, break of 103.59 cluster resistance, as well as 55 days EMA (now at 103.31) argues that a medium term bottom is in place after down trend from 124.13 has just met 76.4% retracement of 79.75 to 147.68 at 95.78. Focus is now on 108.59 resistance and break of which will break a series of lower highs, lower lows pattern that started at 124.13 and will confirm that this down trend has completed already. In such case, stronger medium term rebound should then be seen to retest 114.77 resistance first.

However, failure below 108.59, followed by break of 100.02 support will firstly indicate rebound from 95.77 has completed. Secondly, it will keep the lower higher, lower lows pattern intact and suggest that down trend from 124.13 is still in force.

Forex News Digest

• U.S. S&P/Case-Shiller Home Price Index Slides in February
• Morning Market Update: Stocks Set to Open Lower While Fixed Income Rallies
• Australian Leading Indicator Declines in February
• CBI Distributive Trades Survey at -26 in April
• U.S. Treasury Secretary Paulson Sees No Need for Second Stimulus Package
• European Market Update: European Bonds Rise, Equities & Euro Decline
• Overnight News Recap: UK Retail Sales Decline, ECB's Wellink Remains Hawkish
• BOE Faces Major Challenges, Must Ensure Inflation Slows to Target, Says King
• Dollar Rises to Three-Week High Versus Euro on Bets Fed Will Signal Pause
• Dollar Advance May Stall at 106.60 Yen on Charts, Mitsubishi UFJ Forecasts
• Bank of America Says Sell Dollar as Federal Reserve Lowers Interest-Rates
• Sell Euro Against Dollar on Bond Spread, Technicals, Rates, Says Citigroup
• Pound Extends Loss Against Dollar as Mortgage Approvals Slumped in March
• New Zealand, Australian Dollars Fall as Reports Show Economies Slowing

More Forex News

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