Dollar recovers mildly as global stocks retreat on disappointment from US housing data. But after all, the greenback is still help below near term resistance level against major currencies and thus, there is no indication of bottoming yet. Nevertheless, note that downside momentum of dollar is clearly diminishing in the current choppy fall and some stronger recovery might be around the corner, with support from pull back in commodities and equities.

Looking at the dollar index, further decline could still be seen with 75.90 minor resistance intact. However, bullish convergence is clearly seen in 4 hours MACD and RSI which indicates diminishing downside momentum. Even in case of another all, downside would likely be contained by lower trend line support (now at 74.91) and bring strong rebound. Above 75.90 will argue that dollar index has bottomed out and will bring stronger rise to test upper trend line resistance (now at 76.74) first.

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BoE Minutes and Fed Beige Book are the two main focuses of the light economic calendar today. The Pound has been boosted by speculations that BoE will pause the GBP 175b quantitative easing program but there are a lot of uncertainties with conflicting messages from BoE officials in the past week. The MPC minutes to be released today will shred some lights on the debate going on within the committee about QE extension. Sterling could be knocked down if some members still expressed preference to extend the program in last meeting. Fed's beige book will probably continue to paint an optimistic picture that economy continues to stabilize in the past two months. Nevertheless, the districts would probably continue to report weak labor markets.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.6310; (P) 1.6399; (R1) 1.6471; More

GBP/USD's rally extends further to as high as 1.6515 so far today and remains firm. Intraday bias remains on the upside with 1.6327 minor support intact. As noted before, sustained trading above the falling trend line resistance is taken as the first indication that whole fall from 1.7043 has completed at 1.5706 already. Focus now turns to 1.6740 resistance. On the downside, below 1.6327 will indicate that an intraday top is at least formed and will turn outlook neutral first.

In the bigger picture, with 1.6740 resistance intact, there is no change in the bearish outlook. GBP/USD should have made a medium term top after completing a head and shoulder top reversal pattern (ls: 1.6742, h: 1.7043, rs: 1.6740). Whole rise form 1.3503, which is treated as correction in the long term decline form 2.1161 has completed too. Fall from 1.7043 is tentatively treated as resumption of the long term down trend, which should target a new low below 1.3503 eventually.

On the upside, however, break of 1.6740 resistance will indicate that fall from 1.7043 has completed already. The three wave structure will in turn suggest that it's merely a correction to the medium term rise from 1.3503. In other words, another high above 1.7043 should be seen before GBP/USD tops.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
0:00USDFed's Plosser to Speak at Stanford on Monetary Policy ---- 
0:00AUDWestpac Leading Index M/M Aug1.10%--1.10% 
8:30GBPBoE Minutes 0-0-90-0-9 
10:00GBPU.K. CBI Quarterly Industrial Trends Total Orders -45-48 
14:30USDCrude Oil Inventories 0.9M0.4M 
16:00USDFed's Lacker to Speak at Economics Workshop at Richmond Fed ---- 
17:00USDFed's Tarullo Speaks to Exchequer Club in Washington ---- 
18:00USDFed Beige Book ---- 
20:30USDFed's Rosengren Speaks at Chatham; Massachusetts ----