After diving to a new 2009 low overnight, dollar recovers in Asian markets today on the back of disappointment in China GDP and retreat in Asian stocks. The economy in China grew an impressive 8.9% yoy in Q3 but fell short of expectation of 9.0%. There were also some speculation that Chinese government may start to pare stimulus spending. Asian markets are generally lower, following late selling in US stocks which sent DOW to close below 10000 level again. Dollar index recovers from overnight low of 74.94 and is back above 75 level but the strength of the recovery is so far limited as gold and oil are steady in range of 1050 and 80 respectively.

Looking at the dollar index, further decline is still in favor with 75.76 minor resistance intact. However, note again that downside momentum is clearly diminishing with bullish convergence conditions in 4 hours MACD. While a marginal break of the lower trend line support (now at 74.89) cannot be ruled out, a rebound should be around the corner. Above 75.76 will indicate that a short term bottom is at least formed and will target upper trend line at 76.65. However, note that sustained break of the lower trend line will in turn argue that recent fall is re-accelerating for next long term support at 74.31 instead.

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On the data front, retail sales data from UK and Canada will be the main focus today. Sterling maintain recent momentum so far, built on expectation that BoE will pause the QE campaign in November. Growth data including today's retail sales and tomorrow's Q3 GDP will be an important factor for this expectation. Retail sales is expected to grow 0.5% mom, 2.8% yoy in September. Canadian retail sales is expected to grow 0.2% mom in August with ex-auto sales up 0.5% mom. Other data to be released include Eurozone current account, US initial jobless claims, leading indicators, house price index and BoC monetary policy report. Released in Asia, Japanese trade surplus shrank to 0.06T JPY in September, all industrial index rose more than expected by 0.9% mom in August. Swiss trade surplus widened to 1.92b in September.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.9211; (P) 0.9271; (R1) 0.9350; More

AUD/USD edges higher to 0.9326 but retreats since then. Upside momentum continues to diminish with bearish divergence conditions in 4 hours MACD and RSI. A short term top should be around the corner, if not formed. Break of 0.9111 support will confirm and bring pull back to 0.8567/8857 support zone. However, note that there is no sign of topping yet as long as 0.9111 support holds and AUD/USD might still extend recent rally towards 100% projection of 0.6284 to 0.8262 from 0.7702 at 0.9756.

In the bigger picture, the strong break of 0.9 psychological level indicates that AUD/USD is regaining upside momentum after drawing support from the medium term rising trend line a few times. As long as this trend line support holds (now at 0.8786), rise from 0.6284 is still in progress and could extend further to retest 08 high of 0.9849. On the downside, a break of 0.8567 support will have the trend line support firmly taken out and will in turn indicate that a medium term top is formed. In such case, deeper pull back could be seen to 0.7702/8262 support zone before resuming the up trend.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
23:50JPYTrade Balance (JPY) Sep0.06T0.38T0.24T0.17T
4:30JPYAll Industry Activity Index M/M Aug0.90%0.40%0.50%0.80%
6:15CHFTrade Balance Sep1.92B1.59B1.79B1.72B
8:00EUREurozone Current Account (EUR) Aug 4.3B6.6B 
8:30GBPRetail Sales M/M Sep 0.50%0.00% 
8:30GBPRetail Sales Y/Y Sep 2.80%2.10% 
12:30CADRetail Sales M/M Aug 0.20%-0.60% 
12:30CADRetail Sales Less Autos M/M Aug 0.50%-0.80% 
12:30USDInitial Jobless Claims 520K514K 
14:00USDLeading Indicators Sep 0.80%0.60% 
14:00USDHouse Price Index M/M Aug 0.30%0.30% 
14:30CADBoC Monetary Policy Report ---- 
14:30USDNatural Gas Storage 22B58B 
14:30USDFed's Rosengren Speaks in Massachusetts on Financial Stability ---- 
16:00USDFed's Lockhart to Speak on Early Childhood Education in Miami ---- 
17:30USDFed's Dudley Moderates Policy Panel at Boston Fed Event ---- 
20:00USDFed's Evans Speaks on Panel in Ann Arbor; Michigan ----