Japanese yen had some jittery today but still managed to gain broadly on risk aversion. Sterling tumbled after release of worse than expected GDP data. Dollar continues to strengthen against major currencies except yen. The greenback is supported as crude oil fails to get hold of 75 level while gold is dropped back below 1090.
Sterling fell sharply today after disappointment from Q4 GDP data. GDP managed to turn positive to 0.1% qoq but fell short of expectation of 0.4% qoq, suggesting that recovery is still fragile and there are much risks of returning into recession. Euro, on the other hand was supported against sterling after release of better than expected Ifo business climate which rose to 18 month high of 95.8 in January.
Japan yen had a roller coaster ride today. Yen strengthen in Asia on talks that PBoC will ask several domestic banks to raise their reserve ratio. Then, yen was shot down by news that S&P placed a negative outlook on Japan's AA sovereign long-term credit rating and warned down a downgrade if "economic data remain weak and measures to boost medium-term growth are not forthcoming, given the country's high government debt burden and its weak demographic profile." Nevertheless, Yen regained strength after Finance Minster Kan assured markets of fiscal discipline.
BoJ left overnight lending rate unchanged at 0.1% as widely expected. Assessment of the economy is left unchanged and is "picking up" thanks to stimulus measures around the world. However, there central bank does not see "sufficient momentum to support a self-sustaining recovery in domestic private demand," yet. Stamping out deflation is still a "crucial challenge" of the bank. Forecasts are broadly unchanged from that made in October and deflation will be more moderate than predict because of "rise in crude oil prices." BoJ Governor Shirakawa said there is no change in the central bank's stance of keeping monetary policy very easy. Finance Minister Kan reiterated today that the BOJ has more options to combat deflation and it's believed that BoJ is considering to expand an emergency loan program or increase purchases of government bonds.
There are talks in the market that PBoC will ask several domestic banks to raise their reserve ratio. Industrial & Commercial Bank of China is believed to have ordered its branches to stop issuing new loans for the rest of January while China Citic Bank has suspended new lending in Shanghai. Bank of China has stopped extending new corporate loans in the Shanghai area. Also, Bank of China's earlier than expected announcement of its fund-raising plans is viewed as a confirmation to view of regulator's determination to slow loan growth.
GBP/JPY Mid-Day Outlook
Daily Pivots: (S1) 145.24; (P) 145.98; (R1) 147.33
GBP/JPY's break of 144.58 confirms that fall from 150.68 has resumed and the cross should now be targeting 141.99 support next. Break there will further affirm the case that consolidation from 139.69 has completed at 150.68 alrady and whole decline from 163.05 is resuming. In such case, deeper decline should be seen to retest 139.26 low next. On the upside, though, above 147.25 minor resistance will mix up the near term outlook and we'll turn neutral first in such case.
In the bigger picture, 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 possibly resuming as consolidation pattern from 139.69 has likely finished at 150.68 already. Break of 139.26 will confirm this bearish case and target 61.8% retracement of 118.81 to 163.05 at 135.70 next. Break will further affirm the case that whole down trend from 2007 high of 251.90 is resuming for another low below 118.81. This will remain the preferred view as long as 150.68 resistance holds.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9005; (P) 0.9048; (R1) 0.9084
AUD/USD's fall resumes after brief consolidation and is now pressing 61.8% retracement of 0.8734 to 0.9327 at 0.8961. At this point, intraday bias remains on the downside as long as 0.9094 minor resistance holds. Sustained trading below 0.8961 fibo support will shift favor to the case that fall from 0.9327 is resuming the whole decline from 0.9404 and AUD/USD should drop through 0.8734 support. On other hand, strong rebound from 0.8961, followed by break of 0.9094 minor resistance, will indicate that fall from 0.9327 is likely just a correction and will flip intraday bias back to the upside for 0.9327 and then 0.9404.
In the bigger picture, the failure below 0.9404 high and deep pull back from 0.9327 mixes up the outlook of AUD/USD and we'll stay neutral for the moment. Nevertheless, one thing to note is that AUD/USD is losing upside momentum as seen with bearish divergence in daily MACD. Hence, even in case of another rise, we'd expect strong resistance as AUD/USD approaches 2008 high of 0.9849 and bring reversal. On the downside, break of 0.8734 support will in turn revive the case that whole medium term rise from 0.6008 has completed and will turn outlook bearish for deeper correction towards 0.7702/0.8626 support zone.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.4121; (P) 1.4157; (R1) 1.4188
EUR/USD's sharp fall today suggests that recovery from 1.4028 might have completed at 1.4193 already. Intraday bias is cautiously on the downside for the moment. Break of 1.4028 will confirm fall resumption and should target next key cluster support at 1.3737. On the upside, above 1.4193 will bring more consolidations. But after all, upside is expected to be limited below 1.4334 resistance and bring fall resumption.
In the bigger picture, medium term rise from 1.2456 has completed at 1.5143 on bearish divergence conditions in daily MACD. Focus now turns to 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will also confirm the case that three wave consolidation from 1.2329 has finished at 1.5134 too. In other words, whole medium term term fall from 1.6039 should be resuming for a new low below 1.2329. On the upside, however, break of 1.4578 resistance will leave the fall from 1.5143 in three wave corrective structure and mixes up the outlook.
GBP/USD Daily Outlook
Daily Pivots: (S1) 1.6134; (P) 1.6196; (R1) 1.6305;
Intraday bias in GBP/USD remains neutral for the moment and consolidation form 1.6077 might continue. But still, upside of the recovery should be limited below 1.6284 resistance and bring fall resumption. Recent development suggests that corrective rise from 1.5829 has completed with three waves up to 1.6456 already and whole decline from 1.6875 should be resuming. Below 1.6077 will flip intraday bias back to the downside for 1.5829 support and break there will confirm this bearish case and target 1.5706 key cluster support. On the upside, though, above 1.6284 minor resistance will delay the bearish view and turn focus back 1.6456 resistance
In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is treated as a correction to down trend from 2.1161, has completed at 1.7043. Firm break of 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) will confirm this case and indicate that whole down trend from 2.1161 is likely resuming for a new low below 1.3503. However, note that break of 1.6456 resistance will in turn shift favor to the case that recent price actions from 1.7043 are merely developing into consolidations to the larger rise from 1.3503. That is, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.
Sterling fell sharply today after disappointment from Q4 GDP data. GDP managed to turn positive to 0.1% qoq but fell short of expectation of 0.4% qoq, suggesting that recovery is still fragile and there are much risks of returning into recession. Euro, on the other hand was supported against sterling after release of better than expected Ifo business climate which rose to 18 month high of 95.8 in January.
Japan yen had a roller coaster ride today. Yen strengthen in Asia on talks that PBoC will ask several domestic banks to raise their reserve ratio. Then, yen was shot down by news that S&P placed a negative outlook on Japan's AA sovereign long-term credit rating and warned down a downgrade if "economic data remain weak and measures to boost medium-term growth are not forthcoming, given the country's high government debt burden and its weak demographic profile." Nevertheless, Yen regained strength after Finance Minster Kan assured markets of fiscal discipline.
BoJ left overnight lending rate unchanged at 0.1% as widely expected. Assessment of the economy is left unchanged and is "picking up" thanks to stimulus measures around the world. However, there central bank does not see "sufficient momentum to support a self-sustaining recovery in domestic private demand," yet. Stamping out deflation is still a "crucial challenge" of the bank. Forecasts are broadly unchanged from that made in October and deflation will be more moderate than predict because of "rise in crude oil prices." BoJ Governor Shirakawa said there is no change in the central bank's stance of keeping monetary policy very easy. Finance Minister Kan reiterated today that the BOJ has more options to combat deflation and it's believed that BoJ is considering to expand an emergency loan program or increase purchases of government bonds.
There are talks in the market that PBoC will ask several domestic banks to raise their reserve ratio. Industrial & Commercial Bank of China is believed to have ordered its branches to stop issuing new loans for the rest of January while China Citic Bank has suspended new lending in Shanghai. Bank of China has stopped extending new corporate loans in the Shanghai area. Also, Bank of China's earlier than expected announcement of its fund-raising plans is viewed as a confirmation to view of regulator's determination to slow loan growth.
GBP/JPY Mid-Day Outlook
Daily Pivots: (S1) 145.24; (P) 145.98; (R1) 147.33
GBP/JPY's break of 144.58 confirms that fall from 150.68 has resumed and the cross should now be targeting 141.99 support next. Break there will further affirm the case that consolidation from 139.69 has completed at 150.68 alrady and whole decline from 163.05 is resuming. In such case, deeper decline should be seen to retest 139.26 low next. On the upside, though, above 147.25 minor resistance will mix up the near term outlook and we'll turn neutral first in such case.
In the bigger picture, 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 possibly resuming as consolidation pattern from 139.69 has likely finished at 150.68 already. Break of 139.26 will confirm this bearish case and target 61.8% retracement of 118.81 to 163.05 at 135.70 next. Break will further affirm the case that whole down trend from 2007 high of 251.90 is resuming for another low below 118.81. This will remain the preferred view as long as 150.68 resistance holds.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9005; (P) 0.9048; (R1) 0.9084
AUD/USD's fall resumes after brief consolidation and is now pressing 61.8% retracement of 0.8734 to 0.9327 at 0.8961. At this point, intraday bias remains on the downside as long as 0.9094 minor resistance holds. Sustained trading below 0.8961 fibo support will shift favor to the case that fall from 0.9327 is resuming the whole decline from 0.9404 and AUD/USD should drop through 0.8734 support. On other hand, strong rebound from 0.8961, followed by break of 0.9094 minor resistance, will indicate that fall from 0.9327 is likely just a correction and will flip intraday bias back to the upside for 0.9327 and then 0.9404.
In the bigger picture, the failure below 0.9404 high and deep pull back from 0.9327 mixes up the outlook of AUD/USD and we'll stay neutral for the moment. Nevertheless, one thing to note is that AUD/USD is losing upside momentum as seen with bearish divergence in daily MACD. Hence, even in case of another rise, we'd expect strong resistance as AUD/USD approaches 2008 high of 0.9849 and bring reversal. On the downside, break of 0.8734 support will in turn revive the case that whole medium term rise from 0.6008 has completed and will turn outlook bearish for deeper correction towards 0.7702/0.8626 support zone.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.4121; (P) 1.4157; (R1) 1.4188
EUR/USD's sharp fall today suggests that recovery from 1.4028 might have completed at 1.4193 already. Intraday bias is cautiously on the downside for the moment. Break of 1.4028 will confirm fall resumption and should target next key cluster support at 1.3737. On the upside, above 1.4193 will bring more consolidations. But after all, upside is expected to be limited below 1.4334 resistance and bring fall resumption.
In the bigger picture, medium term rise from 1.2456 has completed at 1.5143 on bearish divergence conditions in daily MACD. Focus now turns to 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will also confirm the case that three wave consolidation from 1.2329 has finished at 1.5134 too. In other words, whole medium term term fall from 1.6039 should be resuming for a new low below 1.2329. On the upside, however, break of 1.4578 resistance will leave the fall from 1.5143 in three wave corrective structure and mixes up the outlook.
GBP/USD Daily Outlook
Daily Pivots: (S1) 1.6134; (P) 1.6196; (R1) 1.6305;
Intraday bias in GBP/USD remains neutral for the moment and consolidation form 1.6077 might continue. But still, upside of the recovery should be limited below 1.6284 resistance and bring fall resumption. Recent development suggests that corrective rise from 1.5829 has completed with three waves up to 1.6456 already and whole decline from 1.6875 should be resuming. Below 1.6077 will flip intraday bias back to the downside for 1.5829 support and break there will confirm this bearish case and target 1.5706 key cluster support. On the upside, though, above 1.6284 minor resistance will delay the bearish view and turn focus back 1.6456 resistance
In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is treated as a correction to down trend from 2.1161, has completed at 1.7043. Firm break of 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) will confirm this case and indicate that whole down trend from 2.1161 is likely resuming for a new low below 1.3503. However, note that break of 1.6456 resistance will in turn shift favor to the case that recent price actions from 1.7043 are merely developing into consolidations to the larger rise from 1.3503. That is, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.
