Dollar Falls Further Against Yen After Durables
Dollar weakens further against the Japanese yen and other majors after a disappointing durable goods report. Markets are still cautious to push
the dollar out of its recent range against European majors as traders awaits Bernanke’s testimony to
the Joint Economic Committee. Meanwhile, the yen was supported by speculation that Japanese investors are repatriating funds ahead of fiscal year end, as well as risk aversion buying on tensions on geopolitical risks concerning Iran, US and UK.
US headline durable goods order rebounded by rising 2.5% in Feb but that was below expectation of a 3.5% rise. Jan’s drop was further revised lower from -8.7% to -9.3%. Ex-transport orders also came in weaker than expected by dropping -0.1%. The so far much weaker than expectation business spending in Jan and Feb are posting tremendous downside risks for Q1 GDP
Released earlier, Mar German prelim CPI rose 0.1% mom, 1.9% yoy which is above expectation of 1.7% yoy rise. HICP was inline with expectation by rising 0.1% mom, 1.9% yoy. UK Q4 current account deficit was wider than expected at -12.7b while GDP was confirmed to be 0.7% qoq, 3.0% yoy. Swiss KOF indicator rose more than expected to 1.9 in Mar comparing to expectation of 1.83.
USD/JPY
Daily Pivots: (S1) 117.54; (P) 117.96; (R1) 118.22;
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As mentioned earlier, USD/JPY’s rise from 115.75 should have already completed at 118.42 after subsequent fall has dragged 4 hours MACD below signal line. At this point, intraday bias will remain on the downside as long as USD/JPY stays below 117.49 minor resistance and further decline is expected to be seen towards 115.75 support. Break of 115.75 will indicate the consolidation from 115.13 has probably completed and bring retest of this low. Break will confirm that fall from 121.61 has resumed for next downside target of 114.02/41 support zone (61.8% retracement of 108.99 to 122.17 at 114.02).
However, as discussed before, the path of the consolidation from 115.13 will likely be choppy and unpredictable. Strong rebound from 115.75 or a rise to above 117.49 minor resistance will indicate that such consolidation is still in progress with risk of another rise. Nevertheless, upside should be still limited by 100% projection of 115.13 to 118.49 from 115.75 at 119.10 and bring another fall.
In the bigger picture, our view remains unchanged. Previous break of medium term rising channel support (108.99, 114.41, 117.87) indicates the whole up trend from 108.99 has completed at 122.17. Weekly MACD’s stay below signal line is still supporting this. The corrective nature of the rise from 108.99 swings favors back to the case that such medium term rally is merely part of a large scale consolidation that started at 121.38, with first leg completed at 108.99 and second leg completed at 122.17. The fall from 121.17 should then the third leg of such consolidation and deeper decline should at least be seen to below 114.02/41 support zone (61.8% retracement of 108.99 to 122.17 at 114.02) first with much possibility of further fall to retest 108.99 low.
However, decisive break of 119.48 fibo resistance will argue that the price actions from 122.17 is developing into large range consolidation instead. A retest of 122.17 high could be seen in such case. But still, firm break above this resistance is needed to confirm medium term rally from 108.99 has resumed. Otherwise, medium term outlook will be neutral at best.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY, EUR/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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