Dollar index spiked to a marginally new low of 75.78 overnight as Gold made another record high of 1062.7 but rebounded strongly on comments from Fed Bernanke. The Fed chief said as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. Though, at this moment, accommodative policies will likely be warranted for an extended period. Nevertheless, the comment raised some speculation that Fed officials has shortened the time frame of policy reversal and gave the greenback some support.

Technically, while gold has continuously made new record high this week, dollar index lagged and only breached to a marginal new low yesterday. EUR/USD is also still kept below 1.4842 high and continues to lose momentum as it approaches this level. The dollar index is now at a make or break level after testing prior low of 75.83. With 4 hours MACD crossed above signal line, intraday outlook is turned neutral. A break of 76.64 minor resistance will indicate that fall from 77.47 has completed and turn focus to this resistance. Most importantly, break there will confirm a double bottom reversal pattern which will strongly suggest that dollar index had bottomed. However, before that, another further selloff and sustained break of 75.83 will open up the medium term bearish case for deeper fall to 71.31/74.31 support zone.


Elsewhere, Japanese machine orders rose less than expected by 0.5% mom in August. German trade surplus narrowed to 10.6b EUR in August. CPI was finalized at -0.4% mom, -0.3% yoy in September. UK PPI, Trade Balance, Canadian employment, trade balance and US trade balance will be released later today.

Canadian dollar underperforms Aussie even though dollar is generally weak against commodity currencies as crude oil underperforms gold. Nevertheless, the Loonie is still strong against other majors and would possibly be boosted in case of upside surprise in today's employment report. For example, current development suggests that EUR/CAD's choppy rebound from 1.5183 has completed at 1.6090 earlier in late September. The corrective structure of such rise indicates that medium term fall from 1.7499 is not finished yet. Current decline is expected to extend further to a new low below 1.5183 going forward.


EUR/USD Daily Outlook

Daily Pivots: (S1) 1.4711; (P) 1.4764; (R1) 1.4845; More

EUR/USD retreats again after edging higher to 1.4815. Another rise could still be seen with 1.4648 minor support intact. But after all, we're still expect strong resistance as EUR/USD approaches 1.4842/2867 resistance zone and bring reversal finally. On the downside, below 1.4648 will indicate that rebound form 1.4760 has completed and will flip intraday bias back to the downside for 1.4483 support first. However, note that a strong break of 1.4867 will invalidate this view and pave the way to 1.5 psychological resistance next.

In the bigger picture, rise from 1.2456 is the third leg of the medium term consolidation pattern that started at 1.2329 and has possibly completed its own five wave sequence at 1.4842 already, on bearish divergence condition in daily MACD. Break of 1.4177 support will add much credence to this case and further break of 1.3747 support will confirm. In such case, deeper decline should be seen that sends EUR/USD through 1.2329 low eventually. Meanwhile, another rise cannot be ruled out for the moment. But we'd continue to expect strong resistance at 1.4867 to bring reversal finally. However, note that strong sustained break of 1.4867 resistance will dampen this view and opens up the case for retesting 1.6039 record high in near term.


Economic Indicators Update

23:50JPYMachine Orders M/M Aug0.50%2.20%-9.30% 
23:50JPYMachine Orders Y/Y Aug-26.50%-25.40%-34.80% 
6:00EURGerman Trade Balance (EUR) Aug10.6B12.4B12.4B 
6:00EURGerman CPI M/M Sep F-0.40%-0.40%-0.40% 
6:00EURGerman CPI Y/Y Sep F-0.30%-0.30%-0.30% 
8:30GBPPPI Input M/M Sep -0.90%2.20% 
8:30GBPPPI Input Y/Y Sep -6.80%-7.50% 
8:30GBPPPI Output M/M Sep 0.10%0.20% 
8:30GBPPPI Output Y/Y Sep -0.10%-0.40% 
8:30GBPPPI Output Core. M/M Sep 0.20%0.20% 
8:30GBPPPI Output Core Y/Y Sep 0.90%0.70% 
8:30GBPVisible Trade Balance (GBP) Aug -6.300B-6.479B 
11:00CADNet Change in Employment Sep -7.5K27.1K 
11:00CADUnemployment Rate Sep 8.80%8.70% 
12:30CADInt'l Merchandise Trade Aug -0.9B-1.4B 
12:30USDTrade Balance Aug -$33.0B-$32.0B