Daily Report: Dollar Firm ahead of FOMC, Aussie Weak

 @ibtimes
on December 16 2009 7:55 AM

Dollar remains firm across the board as market awaits FOMC statements today. The stronger-than-expected employment report in November triggered speculations that the Fed will hike its policy rate earlier than previously anticipated. This also led to a fight back in the dollar. However, one month's optimistic data is not going to alter policymakers' stance significantly. Therefore, there will likely be minor change in the FOMC statement and Chairman Bernanke will announce to keep the Fed funds rate at 0-0.25% for an extended period of time. Nevertheless, Fed will acknowledge positive economic development in recent weeks such as noting that the labor market and the financial market has improved.

Before that, the markets will also receive a number of important economic data from cross the Atlantic. That will include job report from UK which is expected to show unemployment rate to climb to 7.9% in OCtober. Eurozone PMI manufacturing and services are both expected to show slight improvement to 51.5 and 53.2 in December. Eurozone CPI is expected to rise 0.2% mom, 0.6% yoy in November. From US, CPI is expected to turn positive to 1.8% yoy due to base effect while core CPI is expected to rise to 1.8% yoy too. Housing starts and Building permits are expected to rebound to 575k and 570k annualized rate in November too.

Aussie continues to be one of the weakest major currencies of the week as it's still feeling the pressure from yesterday's dovish RBA minutes. In addition, Australian GDP reported today was disappointing, showing 0.2% qoq, 0.5% yoy growth in Q3 comparing to expectations of 0.4% qoq, 0.7% yoy. While we're expecting Aussie to underperform NZD in near term, it's also showing some relative weakness against sterling too. GBP/AUD will likely have a take on 1.8320 resistance and a break there will bring stronger rebound to upper channel resistance at 1.95/96 level.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.9005; (P) 0.9089; (R1) 0.9145;

AUD/USD's break of 0.9013 indicates that fall fro 0.9321 has resumed and should now be targeting 0.8945 support first. Break will indicate that AUD/USD has topped out in medium term at 0.9404 already. Deeper decline should then be seen to 100% projection of 0.9404 to 0.8945 from 0.9321 at 0.8862 first and then 23.6% retracement of 0.6008 to 0.9404 at 0.8603 next. On the upside, above 0.9090 minor resistance will turn intraday bias neutral again. But recovery should be limited below 0.9193 resistance and bring fall resumption.

In the bigger picture, at this point, we're still slightly preferring the bearish case that medium term rise from 0.6008 has completed at 0.9404 already, with bearish divergence condition in daily MACD. This is supported with weekly MACD crossed below signal line. Break of 0.8945 support will confirm this case by completing a head and shoulder top (ls: 0.9326, h: 0.9404, rs: 0.9321). In such case, sizeable correction should be seen to 0.7702/0.8626 support zone but strong support should be seen there to bring rebound. On the upside, break of 0.9193 resitsance will shift favors back to the case the recent price actions in AUD/USD are merely consolidations in the larger up trend from 0.6008 and such rise is not completed yet.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised

23:30
AUD
Westpac Leading Index M/M Oct
0.40%
--
0.90%
1.10%

23:50
JPY
Tertiary Industry Index M/M Oct
0.50%
0.50%
-0.50%
-0.60%

00:30
AUD
GDP Q/Q Q3
0.20%
0.40%
0.60%
0.60%

00:30
AUD
GDP Y/Y Q3
0.50%
0.70%
0.60%
 

08:30
EUR
German PMI Manufacturing Dec A
 
52.6
52.4
 

08:30
EUR
German PMI Services Dec A
 
51.9
51.4
 

09:00
EUR
Eurozone PMI Manufacturing Dec A
 
51.5
51.2
 

09:00
EUR
Eurozone PMI Services Dec A
 
53.2
53
 

09:30
GBP
Claimant Count Change Nov
 
12.0K
12.9K
 

09:30
GBP
Claimant Count Rate Nov
 
5.10%
5.10%
 

09:30
GBP
ILO Unemployment Rate (3M) Oct
 
7.90%
7.80%
 

10:00
EUR
Eurozone CPI M/M Nov
 
0.20%
0.20%
 

10:00
EUR
Eurozone CPI Y/Y Nov
 
0.60%
0.60%
 

10:00
EUR
Eurozone CPI - Core Y/Y Nov
 
1.20%
1.20%
 

13:30
CAD
Manufacturing Shipments M/M Oct
 
0.50%
1.40%
 

13:30
USD
CPI M/M Nov
 
0.40%
0.30%
 

13:30
USD
CPI Y/Y Nov
 
1.80%
-0.20%
 

13:30
USD
CPI CoreM/M Nov
 
0.10%
0.20%
 

13:30
USD
CPI CoreY/Y Nov
 
1.80%
1.70%
 

13:30
USD
Housing Starts Nov
 
575K
529K
 

13:30
USD
Building Permits Nov
 
570K
552K
 

13:30
USD
Current Account Balance Q3
 
-$106.0B
-$98.8B
 

15:30
USD
Crude Oil Inventories
 
-2.1M
-3.8M
 

19:15
USD
FOMC Interest Rate Decision
 
0.25%
0.25%
 

Share this article