Dollar and yen recovers strongly in early US session as stocks open slightly lower on mixed earning reports. The greenback is also helped by retreat in commodity prices where Gold drops back to 940 regions and Crude oil lowed to below 68 level. Dollar index made a new low of 78.32 earlier today but failed to sustained below key support of 78.33 and recovered, arguing that dollar's fall is not ready to resume yet. Note that key near term levels in major pairs and yen crosses are still holding and thus, there is no change in the short term bearish outlook of dollar and yen in general. However, we'd like to point out again that recent stock rally is not followed by downside break out in dollar which makes us skeptical on the sustainability of the current risk seeking sentiments. While we're still expecting some more downside in dollar and yen before bottoming, we'll continue to be alerted to signals of earlier than expected reversals.

/

On the data front, Conference Board consumer confidence dropped more than expected to 46.6 in JUly. S& P Case-Shiller 20 cities composite showed further improvement in the housing market. House prices in 20 major US cities dropped -17.1% yoy in May, better than expectation of -17.85% yoy. Also it showed the first monthly gain in three years by 0.5%. This is another piece of data that affirm the view that the housing market in US is stabilizing. Released earlier UK CBI distributive trades rose less than expected to -15 in July versus consensus of -12. Swiss UBS consumption indicator rose from 0.77 to 0.96 in June. New Zealand trade balance unexpectedly showed -417M deficit in June.

Aussie was boosted by upbeat comments from RBA Governor Stevens overnight and remains firm throughout the day. Stevens said that the down turn in Australia turned out not to be one of the more serious ones of the postwar era, and there are more upside risks to the outlook which balance out the downside ones comparing to six months ago. The rise in unemployment was also a little slower than feared. The comments led some economist believe that there won't be further rate cuts from RBA unless there are fresh shocks from the global economy and the bank might turn out to be the first major central banks to withdraw stimulus policies.

Strength in Aussie is seen across the board. For example, EUR/AUD breaks through 1.7145 low today and confirms that whole medium term down trend is resuming for next key level of 1.6045. GBP/AUD break 2.0 level this week and dives to as low as 1.9824 so far today. We've mentioned that medium term down trend in GBP/AUD is resuming after consolidation from 1.9684 has completed at 2.0979. Hence further weakness is expected to send GBP/AUD through 1.9684 low. In other words, we're expecting Aussie to continue to outperform European majors in general.

/

/

USD/CHF Mid-Day Outlook

 

Intraday outlook in USD/CHF remains neutral for the moment as choppy sideway trading from 1.0622 is still in progress. Another rise cannot be ruled out but we'd continue to expect upside to be limited by 1.0816 resistance and bring fall resumption. Below 1.0622 will bring retest of 1.0590 low first. As noted before, consolidation from 1.0590 should have completed already and whole fall from 1.1963 is likely resuming. Current decline is treated as the last leg in the five wave sequence from 1.1963 and will target 1.0366 low next. Break of 1.0590 low will confirm this bearish view. However, above 1.0816 will mix up short term outlook and turn focus back to 1.0938 resistance.

In the bigger picture, there is no change in the broader view that price actions from 1.2296 are consolidation to whole medium term rise from 0.9634 only, with fall from 1.1963 as the third leg. Indeed, the possible five wave structure of such decline from 1.1963 argues that it's the last leg of consolidation and is near to completion. Hence, while another fall is likely and a marginal low below 1.0366 cannot be ruled out, downside should be contained by 61.8% projection of 1.1740 to 1.0590 from 1.1021 at 1.0310 to complete the fall from 1.1963 and the consolidation from 1.2296. On the upside, above 1.0938 resistance will in turn argue that fall from 1.1963 has completed and break of 1.1021 will solidify the bullish case and pave the way for strong rebound.

USD/CHF

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
22:45NZDTrade Balance (NZD) Jun-417.0M214.0M858.0M907.0M
03:00AUDRBA Governor Stevens Speaks ---- 
06:00CHFUBS Consumption Indicator Jun0.96--0.770.75
10:00GBPU.K. CBI Distributive Trades Jul-15-12-17 
13:00USDS& P/Case-Shiller Composite-20 Y/Y May-17.10%-17.85%-18.12% 
14:00USDConference Board Consumer Confidence Jul46.649.149.3