Dollar is trying to fight back in early US session with the help of selloff in Gold, which breaks through recent low of 1352. The greenback is also supported by initial jobless claims dropped more than expected to 404k. Aussie is particularly weak as hurt by gold's fall as well as concern on China tightening The Japanese yen, is another weak currency today on concern of worsening government finances in Japan. Also, yen would be vulnerable to further decline if longer term US treasury jumps as the US session goes.

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Euro is steadily in range today. There are rumors of a plan B for easing Greece's debt situation as reported by German newspapers. The plan B involves the European Financial Stability Facility (EFSF) selling back bonds as a discount to Greece and to buy back these bonds, Greece would be granted more money from the EFSF fund. Current Greece bonds' market value is at around 20% below their issue price. IN that case, Greek bond owners will be forced to decide whether to take a financial loss now or hold on to the bonds and hope for a better return in the future.

Commodity currencies remain generally weak today on worry of more tightening measures from China. China's annual GDP growth accelerated to 9.8% qoy in Q4, far above expectation of 9.3%. CPI slowed more than expected to 4.6% yoy December after reaching a 28-month higher of 5.1% in November. But that was well above some estimates of 4.4% yoy and is still at worrying level. China raised banks' reserve requirement seven times last year but hiked rates twice only. Investors are worrying that more forceful moves lie ahead to cool both growth and inflation.

Dollar index continues to lose downside momentum as fall from 81.31 goes. There is no change in the view that such decline is merely the third leg of the whole consolidation pattern from 81.44. While another fall cannot be ruled out yet, strong support should be seen between 77.97 and 61.8% retracement of 75.63 to 81.44 at 77.85 and bring rebound. Above 79.59 minor resistance will flip intraday bias back to the upside for retesting 81.31/44 resistance zone.

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EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3381; (P) 1.3459 (R1) 1.3551; More.

EUR/USD continues to struggle around 1.35 level and intraday bias remains neutral. Failure to sustain above 1.3496, followed by break of 1.3245 will indicate that rebound from 1.3245 is finished and will turn focus back to 1.2873 low. Break will confirm that whole fall from 1.4281 is still in progress. On the upside, break of 1.3537 and sustained trading above 1.3496 will confirm that whole decline from 1.4281 has completed at 1.2873 already. Note that the corrective three wave structure of the fall, with 1.2643 support intact, will indicate that rebound from 1.1875 is possibly not over yet.

In the bigger picture, main question remains on whether medium term correction from 1.6039 has finished with three waves down to 1.1875. Current development, the shallower than expected fall from 1.4281, suggests that could indeed be a correction to rebound from 1.1875 only. And with 1.2643 support intact, rise from 1.1875 would possibly be in progress. Break of 1.3496 will target a test on 1.4281 resistance. On the downside, below 1.2873 will turn focus back to 1.2643 instead.

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Economic Indicators Update

GMTCcyEventsActualConsensusPreviousRevised
21:45NZDCPI Q/Q Q42.30%2.40%1.10% 
21:45NZDCPI Y/Y Q44.00%4.10%1.50% 
23:30AUDConsumer Inflation Expectation Jan4.60%--2.80% 
07:00EURGerman PPI M/M Dec0.70%0.50%0.20% 
07:00EURGerman PPI Y/Y Dec5.30%5.10%4.40% 
10:00CHFZEW Survey (Expectations) Jan-18.4---12.5 
11:00GBPCBI Trends Total Orders Jan-160-3 
13:30CADLeading Indicators M/M Dec0.50%0.40%0.30% 
13:30CADWholesale Sales M/M Nov1.20%0.60%0.00% 
13:30USDInitial Jobless Claims404K426K445K 
15:00USDPhiladelphia Fed Survey Jan 22.320.8 
15:00USDExisting Home Sales Dec 4.92M4.68M 
15:00USDLeading Indicators Dec 0.70%1.10% 
15:30USDNatural Gas Storage -223B-138B 
16:00USDCrude Oil Inventories -1.1M-2.2M

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