Dollar was sharply lower after Bernanke's comment overnight but stabilizes a bit in Asia today. Nevertheless, the greenback is still feeling the pressure from Gold which made another record high at 1144. Crude oil also rebounded and breached 79 level briefly. On the other hand, yen remains steady in range so far and even managed to rally against dollar. We'd maintain that Nikkei is under performing US stocks and is completing a head and shoulder reversal pattern. Hence the yen will feel less pressure from 'risk appetite'.
Much volatility in dollar was triggered by Bernanke overnight. The greenback was shot up against Euro and Swissy as Bernanke said that Fed's policy will ensure that dollar is strong. But the boost was brief as markets chose to listen more to Bernanke's comment that significant economic challenges remain and reiterated that rates will be kept exceptionally low for an extended period.
Dollar index drops to as low as 74.68 before recovering mildly. The break of 74.78 confirms that recent down trend has resumed and further fall should be seen to 74.31 support next. Nevertheless, we'd continue to expect loss of momentum and reversal as dollar index hits this support. Break of 75.76 resistance will be an early sign of bottoming.
RBA Minutes said that further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question. The minutes raised questions on whether RBA would hike again in December. And there are speculations that even if RBA does continue the tightening cycle in December, there would be a pause in Q1. Aussie is mildly lower after the minutes.
But after all, Aussie remains generally strong. EUR/AUD dropped further to as low as 1.5947 earlier this week and is still in progress to lower trendline support of 1.5640. Outlook will continue to remain bearish as long as 1.6467 resistance holds.
Looking ahead, inflation data will be the main focus today. UK CPI is expected to climb slightly from 1.1% yoy to 1.4% yoy in October while core CPI is expected to rise from 1.7% yoy to 1.8% yoy. Eurozone trade balance is expected to show -0.9b Euro deficit in September. US PPI is expected to rise 0.5% mom Oct with yoy rate up from -4/8% to -1.7%. Core PPI is expected to rise 0.1% mom with yoy rate down from 1.8% to 1.4%. TIC capital flow is expected to drop slightly to 27.3b. Industrial production is expected to rise 0.4% in October. NAHB housing market index is expected to rise to 19 in November.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9321; (P) 0.9363; (R1) 0.9410; More
AUD/USD surges further to as high as 0.9404 before retreating mildly. While upside momentum is diminishing a bit, there is no clear indication of topping yet. Further rise could still be seen as long as 0.9209 support holds. Next target will be 100% projection of 0.6284 to 0.8262 from 0.7702 at 0.9680. Nevertheless, break of 0.9209 will indicate that a short term top is formed, possibly with bearish divergence conditions in 4 hours MACD and RSI. In such case, pull back should be seen to medium term trend line support (now at 0.9061) first.
In the bigger picture, at this point, there is no indication of completion of medium term rise from 0.6008 yet. Such rally could still extend further to retest 0.9849 high next. However, sustained trading below the channel support (now at 0.9061) will be first signal of reversal. Further break of 0.8915 will complete a double top reversal pattern (0.9326, 0.9368) and in such case, deeper fall should be seen to 0.7702/8262 support zone.
Economic Indicators Update
|23:50||JPY||Tertiary Industry Index M/M Sep||-0.50%||0.10%||0.30%|
|0:30||AUD||RBA Meeting Minutes||--||--|
|8:15||CHF||Retail Sales (Real) Y/Y Sep||1.10%||-1.00%|
|9:30||GBP||CPI M/M Oct||0.10%||0.00%|
|9:30||GBP||CPI Y/Y Oct||1.40%||1.10%|
|9:30||GBP||Core CPI Y/Y Oct||1.80%||1.70%|
|9:30||GBP||RPI M/M Oct||0.10%||0.40%|
|9:30||GBP||RPI Y/Y Oct||-1.00%||-1.40%|
|10:00||EUR||Eurozone Trade Balance (EUR) Sep||-0.9B||1.0B|
|13:30||USD||PPI M/M Oct||0.50%||-0.60%|
|13:30||USD||PPI Y/Y Oct||-1.70%||-4.80%|
|13:30||USD||PPI Core M/M Oct||0.10%||-0.10%|
|13:30||USD||PPI Core Y/Y Oct||1.40%||1.80%|
|14:00||USD||Net Long-term TIC Flows Sep||27.3B||28.6B|
|14:15||USD||Industrial Production Oct||0.40%||0.70%|
|14:15||USD||Capacity Utilization Oct||70.80%||70.50%|
|18:00||USD||NAHB Housing Market Index Nov||19||18|