Yen and dollar are generally higher as the week starts, with aussie and kiwi hit most so far. Risk aversion seems to be driving the movements today as the World Bank revised down global growth forecast in 2009 and said prospects for the world's economy remained unusually uncertain even though there were signs of improvement in some countries. The World Bank also urged governments to be vigilant in planning for exit strategies. Crude oil was back blow 70 level and dollar is attempting to complete last week's consolidation against Euro, Swissy and Canadian dollar. Focus is now of near term levels of 1.3830 in EUR/USD, 1.0897 in USD/CHF for further sign that dollar is gathering momentum.

The World Bank revised down global growth forecast in 2009 from -1.7% to -2.9%. US economy is expected to contract deeper by -3.0%, down from -2.4%. Eurozone is expected to contract by -4.5%, down from -2.7% while Japan is expected to contract by -6.8%, down from -5.3%. Outlook for emerging markets are mixed with Russia expected to drop -7.5%, down from -4.5% and Brazil to contract -1.1%, down from +0.5%. However, China's economy is expected to expand +7.2%, up from +6.5% while India's economy is expected to expand +5.1%, up from +4.0%.

ECB president Trichet urged governments in the euro region to start cutting down budget deficits. He said that simulative packages thus far have been completely extraordinary and are therefore sufficient. He said there is a moment where you can't spend any more and you can't accumulate any more debt. I think we are at that moment. Also Trichet said that geo-political tension in Iran is a risk factor on the international economy. Iran is a part of a wider analysis that would be associated with risks for the oil markets, not just because of Iran but because of the whole region.

On the data front, UK Rightmove House Prices dropped -0.4% mom in Jun. Japanese BSI Large manufacturing index dropped -13.2 Q/Q in Q2. Tertiary Industry Index rose 2.2% mom in April. Main focus today is on Germany Ifo business climate, which is expected to continue to improve to 85 in Jun.

Looking at the dollar index, the corrective structure of price actions from 81.36 suggests that recent rebound is not over yet and favors an upside break out. We're still favoring the case that whole decline from 89.62 has completed earlier at 78.33 already, ahead of key support of 77.69. Hence, while some more pull back cannot be ruled out for the moment, we'd expect downside to be contained by 79.19 support. A break above 8.136/47 resistance zone will confirm that rebound from 78.33 has resumed and should target next key resistance at 82.62 (38.2% retracement of 89.62 to 78.93 at 82.64).

USD/CHF Daily Outlook

USD/CHF rebounds strongly as the week starts is is set to take on 1.0897 minor resistance. As mentioned before, break there will suggest that consolidation from 1.0954 has completed and will flip intraday bias back to the upside. Further break of 1.0954/1.0985 resistance zone will confirm that whole rebound from 1.0590 has resumed and should target 1.1158/1740 key resistance zone next. On the downside, while some more consolidation cannot be ruled out for the moment, downside is still expected to be contained by 1.0650 support and bring strong rebound.

In the bigger picture, fall from 1.1963 is treated the third leg of the consolidation that started at 1.2296, which corrects the whole rally from 0.9634. With daily MACD staying well above signal line, such decline is tentatively treated as completed and hence, stronger rise is in favor to 1.1158/1.1740 resistance zone. Nevertheless, we'd favor that such consolidation is developing into triangle pattern and hence, upside should be limited by 1.1158/1740 initially and bring one more fall before completing the consolidation. However, break of 1.1963 will serve as the first signal that whole rally from 0.9634 is resuming.

On the other hand, note that a break of 1.0590 low will indicate that fall from 1.1963 is still in progress for 1.0366, or even further to 100% projection of 1.2296 to 1.0366 from 1.1963 at 1.0033 before completing the consolidation from 1.2296.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
23:01GBPRightmove House Prices M/M Jun-0.40%--2.40%
23:50JPYBSI Large Manufacturing Q/Q Q2-13.2---66
23:50JPYTertiary Industry Index M/M Apr2.20%2.30%-4.00%-2.80%
8:00EURGerman IFO Business Climate Jun8584.2
8:00EURGerman IFO Expectations Jun86.985.9
8:00EURGerman IFO Current Assessment Jun8382.5
12:30CADInternational Securities Transactions (CAD) Apr4.27B6.849B