Dollar pares some recent gains on news that Abu Dhabi is providing $10b to help Dubai World to meet it's obligations. Dubai will use $4.1b to repay an Islamic bond maturing today for Nakhell PJSC, its real-estate unit. The rest of the money will be used to pay trade creditors, contractors, interest expenses and be the working capital through April 2010. The news came in as a relief for the market and sent stocks higher.
Japanese yen trades higher today after release of better than expected quarterly tankan survey. The large manufacturers index improved from -33 to -24 in Q4 while the non-manufacturing index rose from -24 to -22. Both were above expectation of -26 and -23 respectively. However, the outlook of capex is bleak as large manufacturers said they'll lower their spending by -28.2% in the fiscal year to March 2010, the biggest drop on record while all large firms plan to cut spending by -13.8%.
According to BoE's Quarterly Bulletin, Chief Economist Spencer Dale said that employment to date has not fallen by as much as we might have feared given the falls in output. A substantial element of the workforce appears to have been able to protect their jobs by accepting slower wage growth. Despite the severe recession, the proportion of households who reported difficulties keeping up with bills and credit commitments had fallen slightly.
Looking at the dollar index, it's retreats mildly ahead of 76.82 resistance and some sideway trading might be seen today. But after all, short term outlook will remain bullish as long as 75.83 support holds. Rise from 74.19 is still expected to continue for 76.82 resistance. Break there will confirm that the index has bottomed out in medium term already. In such case, we'll be looking at a strong rebound to 38.2% retracement of 89.62 to 74.19 at 80.08, as a correction to fall from 89.62, in the least bullish scenario.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9079; (P) 0.9136; (R1) 0.9183;
AUD/USD's recovery might have completed at 0.9193 already and with 4 hours MACD crossed below signal line, intraday bias is mildly on the downside for the moment. Break of 0.9013 support will indicate that fall from 0.9321 has resumed and should target 100% projection of 0.9404 to 0.8945 from 0.9321 at 0.8862 next. On the upside, above 0.9193 will turn bias neutral again. But after all risk will remain on the downside as long as 0.9321 resistance holds and we'd continue to prefer the bearish case that AUD/USD has topped out in medium term already.
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, decisive break of 0.9321 resistance will indicate that fall form 0.9404 has completed. The corrective three wave structure will indicate that AUD/USD's up trend is not completed yet and medium term rally from 0.6008 is still in progress for 0.9849 high.