Markets are generally steadily in range quietly with holiday in Japan, US and Canada today. Dollar is a touch firmer, in particular against Aussie in spite of speculations that banks in Australia will raise rates beyond RBA in coming months. Sterling is the relatively weaker one which breaks near term low against Euro and dollar to resume recent down trend. Stocks in Asian are slightly lower as traders take profits ahead of earning announcements from US later this week. Gold and oil also consolidates in tight range.
An article in the Daily Telegraph said that the big four banks in Australia will lift interest rates beyond the official RBA cash rate increase because of rising costs of raising money. NAB said the costs of funds is rising and forecasts suggest it will continue to rise well into 2010.
Sterling dives through recent low against dollar and euro ahead inflation and employment data to be released later this week. The pound is still under tremendous pressure that BoE would expand the stimulus measures, including the chance of cutting deposit rates if data this week continue to disappoint.
Following up on GBP/AUD, the down trend extended further as expected and reached as low as 1.7492 so far. The break of lower channel support and 100% projection of 2.2877 to 1.9684 from 2.0979 at 1.7966 suggests that the downside is accelerating. The cross might now extend further towards double projection target at 1.60/61 level (100% projection of 2.2877 to 1.9684 from 2.0979 at 1.6104 and 100% projection of 2.7092 to 2.0231 from 2.2877 at 1.6016) before bottoming. On the upside, break of 1.8467 resistance needs to be the first sign of stabilization. Otherwise, outlook will remain bearish.
Dollar index's recovery from 75.78 extends further today and touching of 76.63 minor resistance suggests that fall from 77.47 has completed. Intraday bias is now cautiously on the upside for a retest of 77.47 resistance first. As noted before, break there will complete a double bottom reversal patter will suggest that dollar index has bottomed out. This will be inline with our view that whole five wave fall from March high of 89.62 will conclude after drawing support from 75.89 key support level. The least bullish case that that is a rebound to 38.2% retracement of 89.62 to 75.83 at around 81 level. However, a break below 76.13 minor support will dampen this view and turn focus back to 75.78 low.
EUR/GBP Daily Outlook
Daily Pivots: (S1) 0.9218; (P) 0.9258; (R1) 0.9335; more
EUR/GBP's rise continues today and the break of 0.9297 resistance confirm that recent rally has resumed. Further rise should now be seen to 0.9494 resistance next. On the downside, below 0.9265 minor support will turn intraday outlook neutral first and bring consolidation. But break of 0.9076 support is needed to indicate that a short term top is formed. Otherwise, outlook will remain bullish.
In the bigger picture, correction from 0.9799 has completed with three waves down to 0.8399 already and rise from there is tentatively treated as resumption of long term up trend. Break of 0.9799 bring rally to next medium term target at 61.8% projection of 0.6535 to 0.9799 from 0.8399 at 1.0416. We'll hold on to this bullish view as long as 0.8704 support holds.