EURUSD Fundamental :

Yen Weakens on Nikkei Rebound and Intervention Talk, Euro and Pound Gain

The Yen would weaken as risk appetite increased after the Nikkei Index bounced from support at 7,000. It was the first time in 26 years that the index had reached that low and the increase in risk appetite would send the USDJPY gaining over 300 points and reaching as high as 96.215. Continued talk of intervention from the BoJ following the G-7 statement that the volatility surrounding the currency was a concern led to the first losses versus the dollar and Euro in a week. Despite the rhetoric, the chances of action from the MoF may be slim as the impact may be minimal at current market conditions. Continued risk appetite may lead to the Yen trading heavy throughout the week.
The Euro would benefit from the increased risk appetite rising to as high as 1.2590 before finding resistance. The move higher was despite more affirmation from ECB President Trichet that another rate cut is likely at the central bank's November 6th meeting. The MPC leader would acknowledge that price pressures have abated enough to allow the central bank to put aside its price stability mandate and focus on growth. Although talk of a coordinated rate cut has been talked about it appears that policy makers will continue easing according to their scheduled policy meetings. Meanwhile, Germany and France released conflicting consumer sentiment reports, as Germans became more optimistic on declining oil prices as the French concerns grew over the credit crisis. The German consumer confidence reading improved to 1.9 from 1.8 as the French printed a decline to -47 from -44. The Euro may continue to gain on increasing risk appetite and an expected rate cut from the Fed. However, as we get closer to the ECB policy meeting we may see the Euro weaken as the central bank may signal that a prolonged easing policy is forthcoming following their expected 25 bops rate cut.

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.