While Asian stocks continues recent rally, with Nikkei back above 10000 level at 10116, dollar continues to stay in range despite trading soft against major currencies. No sharp rally is seen in yen crosses neither. Crude oil, on the other hand, extends recent rise to as high as 68.87 so far. And the currency markets continue to lag behind equities and commodities in the current risk appetite trades. Nevertheless, Aussie is seen firm across the board which may resume recent rise sooner than other major currencies with support from commodities.
Bernanke said overnight that the actions taken in the past year by Fed were aimed at avoiding a second Great Depression. He emphasized that if big firms are let collapsed in a disorderly way, it will bring down the whole system. Nevertheless, he expressed he's disgusted with the situations that led him rescue a couple of big firms and called for new laws to also financial firms to fail without going into bankruptcy.
On the data front, Japanese Corporate Services Price Index dropped -3.2% yoy in June, inline with expectations. Germany Import price rose less than expected by 0.4% mom in June but Gfk consumer confidence rose sharply from revised 3.0 to 3.5 in Aug. Looking ahead, Eurozone M3 money supply growth is expected to be unchanged at 3.7% yoy in June. New home sales in US is expected to rise slightly from 342k to 355k in June, and breaks the 6 months average level.
Looking at the dollar index, while some sideway trading might be seen, we'd expect upside of recovery to be limited well below 79.66 cluster resistance. Below 78.42 will bring fall resumption to 78.33 support and then 77.69 key support. As mentioned before, the five wave sequence from 89.62, be it the third wave of consolidation from 88.46 as we viewed, or start of a new trend, should be contained by 75.89/77.69 support zone and bring strong rebound.
Intraday outlook in AUD/USD remains neutral for the moment as the pair is still staying in range below 0.8221. Another fall to 4 hours 55 EMA (now at 0.8089) cannot be ruled out but downside is expected to be contained above 0.7959 support and bring rally resumption. Above 0.8221 will target a retest of 0.8262 high first. Break there will confirm resumption of medium term up trend and should target 61.8% retracement of 0.9849 to 0.6008 at 0.8382 next. However, note that a break of 0.7959 will mix up the short term outlook and put focus back to 0.7702 low.
In the bigger picture, there is no change in the broader view that price actions from 0.6008 are correction to down trend form 0.9849 only. Rise from 0.6284 is the last leg and should be near to completion. While another rise might be seen, upside is expected to be limited by 0.8382/8519 resistance zone (61.8% retracement of 0.9849 to 0.6008 at 0.8382) and finally bring reversal. On the downside, below 0.7702 support will now be an important alert that AUD/USD has topped out and will turn short term outlook bearish for deeper decline.
Economic Indicators Update
|23:50||JPY||Corporate Service Price Y/Y Jun||-3.20%||-3.20%||-3.00%|
|6:00||EUR||German Import Price Index M/M Jun||0.40%||0.60%||0.00%|
|6:10||EUR||German GfK Consumer Confidence Aug||3.5||2.9||2.9|
|8:00||EUR||Eurozone M3 Money Supply Y/Y Jun||3.70%||3.70%|
|14:00||USD||New Home Sales Jun||355K||342K|