Yen Retreats as Stock Rebounds

Daily Report: 

Yen Retreats as Stock Rebounds, Dollar to Follow?

The Japanese yen retreats further today following rebound in Asian stock markets as well as increased speculation of intervention. Nikkei is up more than 6% after hitting a 26 years low yesterday. MSCI Asia Pacific Index is up over 2% after closing at the lowest level since Aug 2003 yesterday. There are also increased speculations of intervention after G7 issued a statement over the weekend expressing it's concern on the strength of yen's exchange rate. Though, the possibility of coordinated intervention is not likely at this moment after French Finance Minister Lagarde said this will be a "pure Japanese" intervention.

Technically speaking, as discussed before, USD/JPY has made a short term bottom at 90.92 last week. Development in other yen crosses indicates that short term bottom should be formed there too. Though, there is still no change in the medium term bearish outlook and the down trend is still expected to extend further after completing the current rebound.

Focus should now turns to the whether the greenback has topped out in short term too. Intraday momentum of dollar index is seen diminishing with mild bearish divergence conditions in 4 hours MACD. A break below 86.65 minor support will argue that a short term top is in place at 87.87 after the index fails below 100% projection of 75.89 to 83.18 from 80.75 at 88.04.***