ASIA session review: Dollar slips vs. yen with Fed outlook in sight

Data released (actual, consensus, previous):                   

00:00 GMT Australia CB Leading Indicator (Apr) 0.3%   _     0.1%        

00:30 GMT Australia Westpac Leading Index (MoM) (Apr)   0.6%   _     0.1%       

The U.S. dollar slipped against the Japanese yen and the euro Wednesday, ahead of highly anticipated guidance from the U.S. Federal Reserve on what it plans to do with its bond-buying program.

Few market participants think the Fed could announce a change in its monthly asset purchases of $85 billion at this meeting, but the language used in the monetary policy statement about an eventual slowing could be important for the dollar.

A Monday afternoon article in the Financial Times said Bernanke was likely to imply the Fed is close to slowing its monthly asset purchases, depending on economic figures.

EURO:

Eurozone officials said today they  won’t revise Cyprus bail out conditions after requests from the  Cypriot President Anastasiades yesterday for a complete revamp of the Eur 10 bln bailout, where the country economy and banking system have been severely damaged, by the conditions imposed on the island.

EUR/USD has tested highs above $1.3400, but failed to set above. Initial support remains at the channel line from May 29, coming now at $1.3350. Below support is around $1.3280 (Jun 13 lows), $1.3200 and $1.3170 (Jun 10 lows). Above $1.3400 (initial resistance, Jan 14 highs) resistance comes at $1.3480, then - near $1.3540 (channel resistance line from May 29).

POUND:

The British pound slipped ahead of the Fed’s announcement as well as the release of minutes from the Bank of England’s policy meeting held earlier this month. The central bank decided to keep its key lending rate at 0.5%, and left the size of its own bond-buying program unchanged.

GBP/USD holds at $1.5650, recovered from yesterday’s lows on $1.5560. Initial resistance comes at recent high on $1.5700, extending to channel line at $1.5730. Next resistances could be found at $1.5765 (Feb 7 high) and $1.5800 (psychological level). Break under yesterday’s lows will widen losses to $1.5500/90 (Jun 7 lows).

YEN:

Bank of Japan Governor Haruhiko Kuroda said on Wednesday during a semi-annual parliamentary hearing in Tokyo that the central bank would maintain its current monetary policy until a sharp change occurs in the economy.

Kuroda assured that the BoJ would do all that is possible to avoid bond market volatility and considerable increases in long-term interest rates, for example by carrying out flexible market operations.

Even though the situation of the economy remains uncertain, the BoJ governor sees it starting to recover gradually in the nearest future while financial markets return to stabilization.

USD/JPY remain above Y95.00, but off session high on Y95.80 (initial resistance). Minor support placed at Jun 17 lows on Y94.30, extending to Y93.80 (Jun 13 lows). Below support comes at Y93.50 (Mar 25 lows) and then - at Y92.50 (Apr 2 lows). Above Y95.80 resistance is around Y96.20 (Jun 12 hourly highs) and Y97.00 (Jun 12 highs).

DATA AHEAD:

At 18:00 GMT   Fed Interest Rate Decision  is expected along with FOMC Economic Projections.   

Fed's Monetary Policy Statement and press conference will start at 18:30  GMT.

NZ  Gross Domestic Product is expected at 22:45 GMT.

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