Oil reached our first target of 53.69 (100% projection of 147.27 to 90.51 from 110.45) and continued to trade lower Wednesday. Although oversold condition and loss of momentum might lead to a brief rebound, bearish outlook in short and medium has not changed.
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Action Insight Daily Report
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.
By ActionForex

Daily Pivots: (S1) 106.86; (P) 107.40; (R1) 108.19

USD/JPY weakens further to as low as 106.21 in early US session and at this point, intraday bias remains mildly on the downside for testing 105.52 support. Break will confirm recent fall from 110.66 has resumed and reaffirm the bearish outlook. Deeper decline should then be seen towards 103.76 support first. On the upside, while above 108.18 will turn intraday outlook neural again, break of 109.18 is needed to invalidate prior bearish view, indicating firstly that correction from 110.66 has completed, secondly, whole medium term rally from 95.77 is still in progress despite the brief break of trend line support last week. Otherwise, further downside is still in favor.

In the bigger picture, the break of medium term trend line support (95.77 to 103.76) indicates that whole medium term rebound from 95.77 should have completed with at 110.66 with bearish divergence condition in daily MACD. Further break of 103.76 support will confirm this case. Also, note the three wave structure of the rise from 95.77 to 110.66 argues that it’s merely a correction in the larger down trend. Hence, in such case, deeper medium term decline should be seen to retest this 95.77 low.

On the upside, however, above 109.18 will firstly suggest that fall from 110.66 is probably completed. Secondly it will dampen the bearish case and suggests that rise fro 95.77 is probably still in progress. Above 110.66 will encourage further rise to 61.8% retracement of 124.13 to 95.77 at 113.30.

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Daily Pivots: (S1) 149.74; (P) 151.12; (R1) 152.10

EUR/JPY’s fall from 169.96 resumes by taking out 150.59 low and dives further to as low as 14906 so far. Short term outlook will remain bearish as long as 157.57 resistance holds. Sustained trading below 149.27 will confirm the medium term bearish outlook and encourage deeper fall to next key level of 140 first. On the upside, touching of 157.57 will indicate that a short term bottom is finally in place and bring rebound to 157.06.

In the bigger picture, last week’s sharp fall and sustained trading below the long term rising channel added strong evidence that whole up trend from 88.97 (00 low) has completed, with bearish divergence conditions in weekly MACD and RSI and with monthly MACD remains below signal line. Focus now turns to 149.27 support and break will confirm this case and bring deeper medium term fall to 38.2% retracement of 88.97 to 169.96 at 139.02 first. On the upside, above 163.07 is needed to indicate fall from 169.96 has completed and invalidate the above view. Otherwise, medium term outlook now remains bearish.

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Action Insight Daily Report
While dollar is strong broadly with dollar index now staying above 80 level, it’s Euro’s particular weakness that’s catching most attention for the moment. EUR/USD took out 1.4 level overnight for the first time in a year and extends weakness to as low as 1.3933. EUR/JPY also took out 150 level to 149.24 so far. Markets are concerned with the dim growth outlook in the Eurozone, in particular after EU downgraded the growth forecasts yesterday. Traders are ignoring hawkish comments from ECB officials and instead, are starting to speculate that ECB may cut rates sooner than expected.

Technically speaking, recent development suggests that Euro’s long term up trends against dollar and yen have topped out in Jul already and it’s probably now in just the beginning of a large scale down trend. Focus is now on 1.3581 and 149.27 level for further evidence.

While the yen extends rally against Euro and Aussie, remains steady bounded in range against dollar, Sterling and even Aussie even though Asian stock markets tumbles sharply. Risk aversion seems not to be the main driving force behind the markets for the moment. Nevertheless, there is still no change in the short term bearish outlook in yen crosses and the recent fall should resume sooner or later. Data

The 50 bps cut from RBNZ to bring OCR down to 7.5% was a surprise to the markets which expected a 25bps cut only. In the accompanying statement, RBNZ Governor Bollard said that “medium-term inflation pressures” is expected to “ease” and it’s now appropriate to move to a less “restrictive stance”. The cut is “warranted in light of tightness of credit conditions” and the time to take to “affect actual interest rates faced by households”.

Aussie was dragged down by Kiwi despite a strong employment report which saw 14.6k growth. More surprisingly, unemployment rate dropped from 4.3% to 4.1% in Aug.

By : ActionForex