Yen Crosses Extend Rally on Risk Appetite

The Japanese yen continues to be the biggest loser this week, in particular to commodity currencies, on risk appetite as well as the aftermath of BoJ's surprised additional easing. Yen crosses are hitting multi-month highs and maintaining solid upside momentum. Asian equities are broadly higher following the 123 pts rally in DOW overnight. DOW's close at 12904 was strong but nonetheless kept below this month's high of 12924 so far, i.e., staying in range. Meanwhile, S&P 500 is kept below last year's high of 1370.58. Thus, risk sentiments is still vulnerable for a reversal. Though, before that, the rally in yen crosses should continue.

The situation in Greece dragged on. The EU meeting will be held on Monday but the market remained uncertain whether the rescue plan will be awarded. Meanwhile, some rumors emerged that European Governments are considering cutting the interest rate on Greece's emergency loans and the ECB might give up profits earned on its Greek bonds. The central bank might exchange its current Greek bonds for bonds that would be exempt from any collective action clause. This raised hope that the PSI deal would be finalized soon.

On the data front, another round of important economic data will be released today. UK retail sales are expected to show -0.2% fall in January. From Canada, CPI is expected to be unchanged at 2.3% yoy in January while core CPI is expected to be unchanged at 1.9% yoy. US CPI is expected to moderate to 2.8% yoy in January with core CPI unchanged at 2.2% yoy.

AUD/JPY's strong rally this week and break of 83.94 resistance confirmed resumption of rise from 72.03. Near term is bullish for 100% projection of 72.03 to 83.94 from 74.77 at 86.68 and above. However, we'd like to emphasize that rebound from 72.03 is not decisively impulsive yet. And, it could indeed be just one leg of the consolidation pattern that started at 88.05. Hence, we'll be cautious on reversal signal as the cross approaches 90.02 key resistance.

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