Dollar remains generally soft as the week starts, edged lower against most major currencies before recovering mildly. Solid data from China, which saw CLSA PMI rose to highest level in a year at 52.8 in June, boosted commodity prices. Crude oil breaches 70 level which in turn gives additional pressure on the greenback. Asian stocks are generally up even though Nikkei closes down 0.04%. While come consolidation might be seen today, the greenback is expected to be under pressure in a week full of event risks.
US Treasury Geithner said that there are signs that recession is easing and positive growth of be seen in the second half of the year. But it's still not clear how strong the growth will be. Nevertheless, Geithner said that unemployment rate may not peak until second half of 2010 and may necessitate another extension in unemployment benefits. Geithner said that the current deficit is unsustainable but didn't respond directly on the possibility of tax increase.
On the data front, German retail sales expectedly dropped for another month in June by -1.8% mom while yoy rated improved to -1.6%. Manufacturing data will be the main focus today with Swiss SVME PMI, UK Manufacturing PMI and finalized reading on Eurozone PMI featured in the European session. US ISM Manufacturing index is expected to improve for the sixth consecutive month to 46.5 in July. More on ISM Manufacturing in Event To Watch: US ISM Surveys
Technically, intraday bias in the dollar index remains on the downside as long as 78.52 minor resistance holds. Current decline, which is treated as the last leg of the five wave sequent from 89.62, is expected to extend further to 77.69 support and below. Nevertheless, we'll start to look for reversal signal as the index enter into 75.89/77.69 key support zone. On the upside, above 78.52 will turn intraday outlook neutral first. But break of 79.66 resistance is needed to indicate that dollar index has bottomed out. Otherwise, short term outlook remains bearish.
Intraday bias in USD/CHF remains on the downside with 1.0751 minor resistance intact. Current fall from 1.0933 should extend further to 1.0590/0622 support zone first. Break there will confirm medium term fall resumption for 1.0366 low. On the upside, above 1.0751 will turn intraday outlook neutral and bring consolidation. But break of 1.0933 resistance is needed to revive the case that USD/CHF has bottomed out. Otherwise, short term outlook remains bearish.
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 1.0933 resistance will now 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.
Economic Indicators Update
|6:00||EUR||German Retail Sales M/M Jun||-1.80%||0.40%||0.40%||-1.30%|
|6:00||EUR||German Retail Sales Y/Y Jun||-1.60%||0.90%||-2.90%||-3.70%|
|7:55||EUR||German PMI Manufacturing Jul F||45.2||45.2|
|8:00||EUR||Eurozone PMI Manufacturing Jul F||46||46|
|8:30||GBP||PMI Manufacturing Jul||47.8||47|
|14:00||USD||ISM Manufacturing Jul||46.5||44.8|
|14:00||USD||ISM Manu Prices Paid Jul||51||50|
|14:00||USD||Construction Spending M/M Jun||-0.60%||-0.90%|