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At 6:00:00 AM E-12 Q4 Construction Production (exp n/f, prev n/a)
The dollar continued its recovery to a high of 129.45 yen on Wednesday after finding support at 127.75 on Monday, which marks the 38.2% retracement of the 115.75-135.15 move. Two consecutive days of gains came after back to back losses on the Nikkei undermined recent yen strength and took profit from the Nikkei's 5% rally last week. There still remains doubt as to whether the Nikkei can maintain its recent gains after the March 31 fiscal year end and whether the spectacular rise in yen on speculative trading will come undone over the next few weeks. BoJ Governor Hayami reiterated today that he expected the market to be stable through the end of March, but he did not say what could happen afterwards.
This was also the fourth session in a row that a Japanese official had cautioned the market over the dollar's fall, indicating that the yen's sharp rise last week was problematic for the Ministry of Finance which prefers a stable currency. Economics Minister Takenaka on Tuesday reiterated that the yen's recent rise was too rapid and his comments were expected to keep speculators at bay. This followed Zembei Mizoguchi, head of the finance ministry's international bureau, who warned on Monday and today that the authorities were prepared to take intervene in the markets if necessary.
USD/JPY will need to break resistance at 129.65 which marks the 38.2% retracement of the 134.95-126.32 move. Failure to break back above that level could entice speculators to target 125.28, the 50% retracement of the 115.75-135.15 move. Follow up resistance is seen at 130.65 and 131.65, which mark the 50%, and 61.8% retracements of the move from 134.95 to 126.32.
EUR/USD recovered from an overnight test of key support at 87.00 and rose to a session high of 87.66 before falling back to a day's low of 87.42. Resistance at 87.60, which marks the 61.8% retracement of the bull move from 86.29 to 88.39, has proved tough resistance this week. On Tuesday, EUR/USD broke below key support at 87.35, which marks the 50% retracement of the same move. More importantly, the pair needs to remain above 87.35, which is the trendline support of the bull move from 86.29. A break of 87.35 would call upon support at 87.10/00, and a break of that key support would damage the bullish sentiment and force many dealers to call 88.39 the high and look for possible new lows below 86.29. Resistance seen at 87.60, which marks the 61.8% retracement of the move from 86.29 to 88.39.
Cable tested support at 1.4135 which marks trendline support from the 1.4043 low of this year. Support is seen at 1.4135 followed by 1.4110. Resistance eyed at 1.4220, 1.4250, 1.4300 and the 200-day moving average of 1.4333. On Tuesday, GBP/USD broke below key support at 1.4180/85 and quickly fell to a new day's low as it tripped stop loss orders along the way to a 1.5-week low 1.4117.
USD/CHF held above support at 1.6780 which is the 50% retracement of the rise from the year's low of 1.6356 to the year's high of 1.7222. However, it could not regain its 200-day moving average of 1.6825 after it slipped below this level last week. Next target seen at 1.6935-40. Support seen at 1.67, backed by 1.6680--the 61.8% retracement of the aforementioned move. Upside faces initial pressure at 1.6840 followed by 1.6885-the 38% retracement of the move.
Today in the FX market No key economic data is expected in the European session. However, there will be a press conference by the French and German FinMins Fabius and Eichel at 3:00 AM. In the US session, Fed Chairman Greenspan will speak at 10:45 AM to an independent community of bankers in Honolulu. Economic data includes US February retail sales which are expected to rise 0.3%.