Dollar tumbles further today on the back of improving risk appetite and strength in commodities. Solid trade data from China showed further sign of recovery in the global economy. Exports dropped -15.2% yoy in September, which was the lowest fall in nine months and a drastic improvement from August's -23.4%. That was also was better than consensus of -21%. In a report, RBNZ said it was removing some of the temporary emergency liquidity measures, including the Term Auction Facility and the regular weekly bill tender. Gold continues to made another record high of 1072 while Crude oil has finally took out 75 level to resume medium term rise.

Dollar index dives to new 2009 low of 75.50 today. While downside momentum remains a little bit unconvincing with bullish divergence conditions in daily MACD, there is no sign of bottoming. Also, as mentioned before, sustained trading below 75.89 support will pave the way for deeper decline towards 71.31/74.31 support zone before bottoming. We'll stay bearish in the dollar index as long as 76.66 resistance holds.


BoJ left the target rate unchanged at 0.1% today on unanimous vote. In the accompanying statement, the bank said that economy has started to pick up. and the need for funding measures has diminished. Nevertheless, the back refrained from hinting on when it would end the emergency measures like corporate debt purchases. Domestic CGPI in Japan rose 0.1% mom in September. Household confidence improved slightly to 40.5.

Looking ahead, a number of important economic data will be released today. In European session, main focus will be on UK employment data which is expected to show unemployment rate to rise to 8.0% in August. Claimant count is expected to be steady at 24.5k in September. EUR/GBP retreats mildly after hitting 0.9410 but any disappointment today will trigger further rally in the cross. Eurozone industrial production is expected to show 1.2% mom rise in August.

From US, main focus will first be on retail sales and then FOMC minutes. Headline retail sales are expected to have declined -2.1% mom in September after rising +2.7% in the previous month. In September, unit auto sales dropped -34.8% to 9.2M as the 'cash for clunkers' program ended. This should have translated into around -10% decline in retail auto sales.

At the accompanying statement, the FOMC unveiled a more optimistic outlook on economic recovery. 'Economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales'. However, inflation outlook was expected to remain subdued for some time. In the minutes, we will look for any discussion on the exit strategy. In recent weeks, some of the FOMC members have delivered more hawkish speech while others, such as Vice Chairman Kohn, reiterated that the Fed will keep its policy rate low for an extended period of time.

USD/CHF Daily Outlook

Daily Pivots: (S1) 1.0179; (P) 1.0228; (R1) 1.0263; More

USD/CHF dips further to 1.0180 today and the break of 1.0185 support indicates that medium term fall from 1.1963 is resuming. Intraday bias remains on the downside and further decline could now be seen towards 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity. On the upside, above 1.0260 minor resistance will turn intraday outlook neutral first. But break of 1.0358 resistance is needed to indicate that USD/CHF has bottomed. Otherwise, outlook will remain bearish.

In the bigger picture, whole set of price actions from 1.2296 are treated as correction to the medium term rally from 2008 low of 0.9634. Fall from 1.1963 is the third wave of such correction in form of five wave sequence (1.1158, 1.1740, 1.0590, 1.0883, ?). With 1.0530 resistance intact, there is no indication of bottoming yet. Nevertheless, USD/CHF should continue to lose downside downside momentum as it approaches key cluster support level of 1.001, 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity and finally bring reversal.


Economic Indicators Update

23:50JPYDomestic CGPI M/M Sep0.10%0.10%0.00%
3:15JPYBOJ Target Rate0.10%0.10%0.10%
5:00JPYHouseholds Consumer Confidence Sep40.541.440.1
8:30GBPClaimant Count Change Sep 24.5K24.4K
8:30GBPClaimant Count Rate Sep 5.10%5.00%
8:30GBPILO Unemployment Rate (3mths) Aug 8.00%7.90%
9:00EUREurozone Industrial Production M/M Aug 1.20%-0.30%
9:00EUREurozone Industrial Production Y/Y Aug -15.50%-15.90%
12:30USDImport Price Index M/M Sep 0.10%2.00%
12:30USDAdvance Retail Sales Sep -2.10%2.70%
12:30USDRetail Sales Less Autos Sep 0.20%1.10%
14:00USDBusiness Inventories Aug -0.90%-1.00%
18:00USDFOMC Minutes ----