The Japanese yen reverses earlier losses following lower opens in the US stock markets. The US equity markets opens lower today following a weak house price report is then sent further lower after much worse than expected consumer confidence report. The S&P/Case-Shiller home-price index dropped for the 13 consecutive months to 10.7% in Jan, the most steepest fall on record. The report indicates that housing recession is probably continuing to deepen and is having no sign of stabilization yet. Conference board consumer confidence in US dropped sharply from revised 76.4 to 64.5 in Mar versus consensus of 74.0. The reading is the second worst since Oct 93.

On the other hand, the greenback remains pressured against Euro and Sterling. Though, traders are cautious on Euro ahead of the highly anticipated Germany Ifo as well as ECB Trichet’s testimony to European Parliament’s economic and monetary affairs committee tomorrow.

Canadian dollar has practically no reaction to better than expected retail sales report which showed 1.5% mom growth in headline sales and 1.3% mom in ex-auto sales versus consensus of 0.9% and 0.5% respectively. The Loonie remains generally pressured across the board on concern that further slowdown in US will continue to drag on the Canadian economy.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 99.73; (P) 100.31; (R1) 101.30; More.

USD/JPY weakens in early US session and touching of 99.59 minor support indicates an intraday top is in place at 101.03. Intraday outlook is turned neutral for the moment. But further decline and break of 07.65 support will indicate that corrective rebound form 95.77 has completed below mentioned 101.23 resistance as expected. In such case, retest of 95.77 low should be seen.

In the bigger picture, as discussed before, USD/JPY has just broken out of multi-year triangle consolidation pattern that started in 98 at 147.68. The decline from 124.13 has met 76.4% retracement of 79.75 to 147.68 at 95.78 so far. Some support is seen at this level. But still, there is no sign of reversal yet. Also, the structure, of the current fall from 124.13 argues that USD/JPY is just in the middle of a larger down trend only.

Medium term outlook remains bearish as long as 103.59 cluster resistance (61.8% retracement of 108.59 to 95.77 at 103.69) holds. Sustained trading below 95.78 will encourage further fall to next important psychological level at 90 first. However, firm break of 103.59 cluster resistance will argue that a medium term bottom is already in place. In such case, stronger medium term rebound should be seen to correct the whole fall from 124.13.

Forex News Digest

Dollar Drops Against Euro on Bets Fed Will Make Deeper Interest-Rate Cuts

Canadian Dollar Declines as Slowdown in U.S. Threatens to Damage Economy

Home Price Index in U.S. Fell Record 10.7% in January, Shiller Survey Says

Bernanke Takes `Bit in His Teeth,’ Expands Fed Role in JPMorgan-Bear Deal

Australian, New Zealand Dollars Advance Versus Yen on Demand for Yield

Dollar Sinks Ahead of Housing Report
Tue, 25 Mar 2008 10:57:00 GMT from Yahoo! Canada

FOREX-Dollar falls as jitters on U.S. economy persist
Tue, 25 Mar 2008 10:51:00 GMT from Forbes.com

Dollar Falls in Europe Ahead of Reports on US Housing and German Investor Settlement
Tue, 25 Mar 2008 10:50:00 GMT from Canadian Business Magazine

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