Dollar pared much recent gains overnight as gold broke out from recent range on news of IMF's 200 tons sales of Gold to Reserve Bank of India and rose to new record high of 1088. Stocks in US consolidated in tight range ahead of FOMC meeting and thus provided little inspiration to the greenback for extending the rally. Yen also retreats mildly. But after all, note that the greenback are still holding above near term support level against major currencies and is still in favor to rise further after the string of events today.

FOMC rate decision will be the major highlight today. The Fed is expected to leave the Fed funds rate unchanged at 0-0.25%. What the market interested in the most is whether the Fed will change the statement, '... economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period', that appeared in September. We anticipate policymakers to keep the statement with the phrase 'an extended period' retained. The Fed prefer to see the job market stabilize and recovery more sustainable before exiting from the current ultra-expansionary monetary policy. More in FOMC Preview - No Change in Policy Rate, Upgrade in Economic Outlook.

Before that, services and job data will take center stage in European and early US session. Eurozone final services PMI is expected to be unchanged at 52.3 in October. PPI is expected top drop -0.4% mom, -7.7 % yoy in September. UK Services PMI is expected to improve slightly to 55.4 in October. From UK, ADP employment report is expected to show -187k contraction in the private sector in October. ISM non-manufacturing index is expected to improve to 51.9 in October.

Released earlier today, UK Nationwide consumer confidence improved to 72 in October. BRC shop price index was flat in October. Australia retail sales unexpectedly dropped -0.2% mom in September.

While weakness in global stocks and risk aversion would likely support the greenback, Gold's strength will probably continue to limit dollar's rebound in near term. Gold's rise from 931.3 would probably extend further to 61.8% projection of 681 to 1007.7 from 931.3 at 1133 level before making a near term top and consolidate.


GBP/USD Daily Outlook

Daily Pivots: (S1) 1.6313; (P) 1.6383; (R1) 1.6505; More

GBP/USD managed to hold above 1.6250 support and recovered. Break of 1.6421 minor resistance turned intraday bias neutral again and suggests that more sideway trading would be seen first. nevertheless, with 1.6603 resistance intact, we're still favoring the bearish case that rebound from 1.5706 has completed at 1.6692 already. Below 1.6261 will bring fall resumption to 1.6119 support first. Break there will target a retest of 1.5706 low. However, above 1.6603 will invalidate this view and turn focus back to 1.6692/6740 resistance zone.

In the bigger picture, while the rebound from 1.5706 was strong, it was still limited below 1.6740 resistance and hence, we'd continue to prefer the bearish case. That is, medium term rebound from 1.3503, which is treated as correction in the long term down trend from 2.1161, has completed at 1.7043. Break of 1.5706 will affirm this case and target a retest of 1.3503 low in medium term. However, note that break of 1.6740 resistance will confirm that fall from 1.7043 has completed with three waves down to 1.5706 already. The three wave structure will indicate that it's merely a correction to medium term rebound from 1.3503 only. In other words, another high above 1.7043 should be seen before GBP/USD tops out.


Economic Indicators Update

23:50JPYMonetary Base Y/Y Oct4.40%--4.50% 
0:01GBPNationwide Consumer Confidence Oct72727172
0:01GBPBRC Shop Price Index Oct0.00%---0.10% 
0:30AUDRetail Sales M/M Sep-0.20%0.50%0.10%-0.90%
8:55EURGerman PMI Services Oct F 50.950.9 
9:00EUREurozone PMI Services Oct F 52.352.3 
9:30GBPPMI Services Oct 55.455.3 
10:00EUREurozone PPI Y/Y Sep -7.7-7.50% 
10:00EUREurozone PPI M/M Sep -0.40.40% 
12:30USDChallenger Job Cuts Y/Y Oct ---30.20% 
13:15USDADP Employment Change Oct -187K-254K 
15:00USDISM Non-Manufacutring Oct 51.950.9 
15:30USDCrude Oil Inventories 1.7M0.8M 
19:15USDFOMC Interest Rate Decision 0.25%0.25%