Dollar retreats mildly in early US session, just ahead of key near term resistance against Euro and Sterling, after soaring for the early part of the day. Treasury yield opens lower with yield on 10 year T-bond down mildly, breaching 3.8% level, but loss is so far limited. The greenback looks set to consolidate recent gains and some sideway trading might be seen in near term before having a test of key near term resistance again. On the other hand , Euro is noticeably weak in crosses as Ireland's credit rating was downgraded by S& P for the second time this year from AA+ to AA, at the same level as Japan, Slovenia and UAE, with a negative outlook.
There are more news about recovery in the global economy. OECD composite leading indicators rose 0.5 pt to 93.2 in April even though it's still 8.3 pts lower than that in Apr 2008, suggesting easing in the global recession. Meanwhile, there were strong indications that the downturn may have hit bottom in Canada, France, Italy and Britain. There were signs of improvement in Japan, Germany and US but the leading indicators are still pointing to a slowdown.
While there are still talk about dollar's status as world's reserve currencies, markets are paying little attention to theses speculations for the moment. Indeed, dollar is positively supported by news that BRICs countries, (Brazil, Russia, India and China) increased reserves by more than $60b in May to limit currency gains. The number represents the largest dollar buying in a year in Brazil, largest gains since Jan 2008 in India and larges since July in Russia. While there have been talk about discussion of de-dollarization in the BRIC summit on Jun e 16 in Russia, markets see last months dollar buying as a sign that BRICs countries are still dependant on the greenback as reserve currency.
On the data front, Japanese current account surplus widened to 0.97T yen in Apr. Eco watchers survey also improved to 36.7 in May. Swiss unemployment rate jumped to 3 year high of 3.5% in May. Eurozone Sentix investor confidence improved more than expected to -27 in Jun. Germany Factory orders though, fell more than expected by -37.1% yoy in Apr. Canadian housing starts rose less than expected to 128k in May.
USD/CHF Mid-Day Outlook
USD/CHF retreats mildly after hitting as high as 1.0985 earlier today. But after all, intraday bias remains on the up side as long as 1.0834 minor support holds. The break of 1.0952 resistance affirms the case that whole fall from 1.1740 has completed at 1.0590 already. Further rally should then be seen to next key resistance zone of 1.1158/1740. On the downside, below 1.0834 will turn intraday outlook neutral first. But pull back should be contained above 1.0590 and bring rally resumption.
In the bigger picture, price actions from 1.2296 are treated as consolidation to whole rally from 0.9634, with first leg completed at 1.0366, second at 1.1963. Break of mentioned 1.0952 resistance argues that the third leg from 1.1963 has completed at 1.0590 too and should bring strong rise towards 1.1158/1740 resistance. Nevertheless, in such case, we'd favor that such consolidation is development into triangle pattern and hence, upside should be limited by 1.1158/1740 initially and bring one more fall before completing the consolidation. However, break of 1.1963 will serve as the first signal that whole rally from 0.9634 is resuming. On the other hand, note that a break of 1.0590 will indicate that fall from 1.1963 is still in progress for 1.0366, or even further to 100% projection of 1.2296 to 1.0366 from 1.1963 at 1.0033 before completing the consolidation from 1.2296.
Economic Indicators Update
|23:50||JPY||Adjusted Current Account Total (JPY) Apr||0.97T||0.96T||0.90T|
|23:50||JPY||Japan Money Stock M2+CD Y/Y May||2.70%||2.60%||2.60%||2.70%|
|05:00||JPY||Eco Watchers Survey: Current May||36.7||34||34.2|
|05:45||CHF||Unemployment Rate May||3.50%||3.60%||3.40%|
|08:30||EUR||Eurozone Sentix Investor Confidence Jun||-27||-31||-34.3|
|10:00||EUR||German Factory Orders M/M Apr||0.00%||0.00%||3.30%||3.70%|
|10:00||EUR||German Factory Orders Y/Y Apr||-37.10%||-33.00%||-26.70%||-26.50%|
|12:15||CAD||Housing Starts May||128K||130.3K||117.4K|