Dollar is mildly higher as the week starts but movements are limited. Dollar index is back above 80.5 level but there is no strong momentum to suggest a reversal yet. Indeed, markets are quite quiet today and most major pairs are stuck in tight range. European stocks are mildly higher with major indices up more than 1. Gold and crude oil are mildly firmer but was kept below last week's highs. Markets will probably continue to stay in consolidative mode before tomorrow's FOMC announcement.

Economic data released from Europe were positive. Eurozone investor confidence jumped to 2.5 years high of 8.5 in August, much better than prior month's -1.3 and expectation of 2. Germany trade surplus widened slightly less than expected to EUR 12.3b in June. Nevertheless, exports rose by 3.8% on the month to EUR 86.5b, hitting the highest level since the collapse of Lehman Brothers. Other data released today saw Japan current account surplus widened less than expected to JPY 1.36T in June. Eco watchers survey current index improved to 49.8 in July.

Japan Finance Minister Yoshihiko Noda reiterated today that Excessive foreign exchange moves can adversely affect the economy and monetary conditions and said he will closely monitor the developments. This followed his comments last week that the move in USD/JPY was a little one-sided. Nevertheless there were no words like ready to take decisive action, which hinted actual intervention. Main focus will turn to BoJ rate decision in Asian session tomorrow and the bank is expected to keep everything unchanged.

Taking about the yen, the outlook is mixed for the moment. While USD/JPY is set to extend recent weakness further, it's losing some downside momentum ahead of key support level of 84.81. Meanwhile, yen crosses are staying in tight range and are generally in favor to extend recent rebound. But after all, yen's outlook is still bullish in medium term. For example, in AUD/JPY, rise from 72.60 might still extend further as consolidation from 71.86 continues. But we'd expect strong resistance at 81.70/80 cluster level to limit upside. Fall from 88.04 is expected to have another leg later and should break through 71.86 support eventually.


USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0309; (P) 1.0409; (R1) 1.0486; More.

USD/CHF's outlook remains bearish with 1.0553 resistance intact and further decline is still expected towards outer trend line support (0.9634, 0.9916, now at 1.0020). On the upside, however, break of 1.0553 will suggest that a short term bottom is at least formed, with bullish convergence condition in 4 hours MACD, and turn bias back to the upside for rebound towards 55 days EMA (now at 1.0733).

In the bigger picture, USD/CHF is possibly in the process of forming a medium term sideway pattern that started as the long term bottom of 0.9634 (2008 low). The pair will continue to stay in converging range of 0.9634/1.2296 for a while. A break of either 0.9916 support or 1.1729 resistance is needed to indicate that USD/CHF is back into a directional trend. Otherwise, medium term outlook will remain neutral.