Dollar rebounded strongly in European session as Gold was hit to as low as 1115 following comments from China. Yi Gang, director of China's State Administration of Foreign Exchange said that whole gold is not a bad asset, the ability to have more investment in gold is limited by a few factors. Yi said that return on gold in the past 30 years hasn't been great. Also, gold will unlikely be a primary investment for China's reserves. Gold extended the fall from last week's high of 1145.8 and dipped to as low as 1115.3 so far. Meanwhile, dollar index was given a boost to 80.80.
Sterling is also noticeably weak today on comments from Fitch that the current plan to cut the UK deficit by a half over four years is too slow. Nevertheless, Fitch said that UK's fundamentals are still supporting its AAA rating. RICS house price balance showed proportion of surveyors reporting a rise in U.K. house prices exceeded the proportion reporting a fall by 17 percentage points, lowest level since last August and sharply missed expectation of 32 percent points. The data suggests that housing recovery in UK is possibly losing momentum again. BRC sales monitor rose 2.2% yoy in February. UK trade deficit widened to GBP -8.0b in January.
Euro is soft ahead of meeting between US President Obama and Greece Prime Minister Papandreou. While there is little expectation of a talk of financial aid for Greece, markets are closely watching what comments will Papandreou make after the meeting. Japanese yen recovers strong as markets are expecting Japanese company to repatriate as much as JPY 1.5% profits in March for fiscal year end. Meanwhile, yen is also helped by mild weakness in European stocks.
Looking at the charts, EUR/AUD broke last week's low and fell to as low as 1.4926 today. Current down trend is expected to continue as long as 1.5323 resistance holds, towards 100% projection of 2.3085 to 1.7145 from 1.8098 at 1.4858. Break will put 1.45 psychological level into radar.
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GBP/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4998; (P) 1.5097; (R1) 1.5163; More
GBP/USD's break of 1.4992 minor support indicates that recovery from 1.4783 has completed at 1.5194 already, after hitting 4 hours 55 EMA. Intraday bias is flipped back to the downside. Break of 1.4783 will confirm fall resumption and should target 200% projection of 1.6875 to 1.5829 from 1.6456 at 1.4364 next. On the upside, above 1.5194 delay the bearish case and bring more consolidations. But upside should be limited by 38.2% retracement of 1.6456 to 1.4783 at 1.5422 and bring fall resumption.
In the bigger picture, there is no change in our bearish view. That is, medium term rebound from 1.3503, which is treated as a correction to down trend from 2.1161, has completed at 1.7043 already. Fall from there is tentatively treated as resumption of the down trend from 2.1161 and should target a new low below 1.3503. On the upside, break of 1.5814 resistance is needed to invalidate this view. Otherwise, outlook will remain bearish.