Dollar regains some ground in Asia following disappointing quarterly Tankan survey from Japan with triggered selloff in Asian stocks and prompted concern of growth in the Japanese economy. Nevertheless, the greenback and yen are still staying in tight range so far and there is no confirmation of resumption of recent rebound yet. Focus will turn to the bunch of economic data report to be released today, including UK PMI, Eurozone unemployment rate, US Personal Income and Spending and ISM manufacturing report for inspirations.

According to IMF report, dollar's share of global currency reserves dropped in Q2 to 62.8%, hitting the lowest level in a decade. The share dropped from 65% in Q1 and 62.9% a year ago. On the other hand, Euro's share rose to a record of 27.5%, up from Q1's 25.9%. This raised some speculations that dollar's reserve status is being threatened.

EUR/CHF's sharp gain yesterday is believed to be triggered by intervention from SNB to curb recent gains in the franc. SNB declined to comment. But again, EUR/CHF lacked follow through buying so far after the spike to 1.5237 and stays in tight range around 1.5170 level and the overall outlook is still quite mixed.

On the data front, Japanese tankan survey released overnight was quite disappointing. Larger manufacturers index improved to -33 but missed expectations of -32. Non-manufacturing index improved to -24, slightly better than consensus of -25. However, capital spending was down from -9.4% to -10.8% showing that companies are worried on the economic recovery. japanese retail sales dropped less than expected by -1.8% yoy in Aug. Nikkei dropped -1.53% to 9978 level and closed below 10000 mark again.

From Eurozone, German retail sales unexpectedly dropped -1.5% mom, -2.6% yoy in August. Eurozone PMI manufacturing is expected to be finalized at 49 in September. Unemployment rate is expected climb to 9.6% in August but may post a pleasant surprise. UK PMI manufacturing is expected to rise to 50.2 in September, showing mild expansion. Swiss SVME PMI is expected to rise to 51 in September.

Fro US Personal income is expected to rise 0.1% in August with spending rising 1.1% but the data is vulnerable to downside surprise based on recent disappointment in consumer confidence. ISM manufacturing index is expected to climb further to 54 showing in September, showing better expansion. jobless claims, pending home sales and construction spending will be released too.

Looking at the dollar index, we're still favoring more upside with 76.50 minor support index and break of 77.33 will bring rally towards 78.93 resistance. Further break there will confirm that a medium term bottom is formed with whole five wave sequence from March high of 89.62 has completed at 75.83 after drawing support from 75.89 key support level. However, note that Crude oil's strong rebound to above 70 level yesterday left the fall from 75 in corrective structure and cast some doubt on the view that it's topped. Similar pattern is seen in gold and the developments dampen the chance that dollar has bottomed. The outlook would probably be cleared after Friday's NFP.


GBP/USD Daily Outlook

Daily Pivots: (S1) 1.5908; (P) 1.6016; (R1) 1.6089; More

GBP/USD's break of 1.5950 minor support suggests that recovery from 1.5769 has completed at 1.6124 already, slightly below mentioned 1.6133 support turned resistance. Intraday bias is flipped back to the downside for retesting 1.5769 first. Break will bring fall resumption to 161.8% projection of 1.7043 to 1.6111 from 1.6740 at 1.5232 next. However, break of 1.6124 again will indicate that stronger rebound is underway towards inner trend line resistance at 1.6280 instead.

In the bigger picture, decisive break of 1.6111 support confirmed the case that GBP/USD has topped out in medium term by completing a head and shoulder top reversal pattern (ls: 1.6742, h: 1.7043, rs: 1.6740). Also, note that medium term rise from 1.3503 is treated as a correction in the long term decline from 2.1161 and should have completed too. Medium term outlook is turned bearish and the current 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, break of 1.6740 resistance is needed to invalidate this bearish view.


Economic Indicators Update

23:50JPYTankan Large Manufacturers Index Q3-33-32-48 
23:50JPYTankan Non-Manufacturing Outlook Q3-24-25-29 
23:50JPYRetail Trade Y/Y Aug-1.80%-2.40%-2.50%-2.40%
6:00EURGerman Retail Sales M/M Aug-1.50%0.20%0.70% 
6:00EURGerman Retail Sales Y/Y Aug-2.60%-0.80%-1.00%-0.80%
7:30CHFSVME-PMIs Index Sep 5150.2 
7:55EURGerman PMI Manufacturing Sep F 49.649.6 
8:00EUREurozone PMI Manufacturing Sep F 4949 
8:30GBPPMI Manufacturing Sep 50.249.7 
9:00EUREurozone Unemployment Rate Aug 9.60%9.50% 
11:30USDChallenger Job Cuts Y/Y Sep ---13.80% 
12:30USDPersonal Income Aug 0.10%0.00% 
12:30USDPersonal Spending Aug 1.10%0.20% 
12:30USDPCE Deflator Y/Y Aug -0.60%-0.80% 
12:30USDPCE Core M/M Aug 0.10%0.10% 
12:30USDPCE Core Y/Y Aug 1.30%1.40% 
12:30USDInitial Jobless Claims 535K530K 
13:00USDFed's Bernanke Testifies at House Financial Services Committee ---- 
14:00USDISM Manufacturing Sep 5452.9 
14:00USDISM Manufacturing Prices Paid Sep 6765 
14:00USDPending Home Sales M/M Aug 1.00%3.20% 
14:00USDConstruction Spending M/M Aug -0.20%-0.20% 
14:30USDNatural Gas Storage 62B67B