Euro was boosted by news that Spain's bond sale received solid demand. Spain raised EUR 3.5b in 10 and 30 year bonds today. More importantly, 30 year bond produced bid-to-cover ration of 2.45, significantly higher than May auction's 1.38. Meanwhile, 10 year bonds produced bid-to-cover ratio of 1.9 to 1, only slightly down from May auctions's 2.03. Yield was significantly higher this time at 4.864% and 5.90% for 10- and 30- year bond respectively. But the overall result is viewed as assuring to investors.

Swiss Franc is even stronger today. The Swiss National Bank maintained its expansionary policy unchanged a left target range for 3 month Libor at 0-0.75%, with target at around 0.25%. The bank played down the impact of Euro's depreciation against Swissy and said that swiss economy is being supported by growth in global demand. Deflationary risk has largely disappeared and SNB expects real GDP growth of around 2% in 2010. Nevertheless, the bank warned of uncertainty from tensions in financial markets with regard to public finances of some countries. SNB raised inflation forecast for 2010 and 2011 slightly to 0.9% and 1.0% respectively. Forecast for 2012 was left unchanged at 2.2%. More in SNB Left Rates Unchanged, More Tolerant To EURCHF Decline

On the data front, US CPI moderated from 2.2% yoy to 2.0% yoy in May while core CPI was unchanged at 0.9% yoy. Current account deficit widened slightly to -109b in Q1. Initial jobless claims expectedly rose to 472k. Canada wholesale sales dropped -0.3% mom in April. UK retail sales surprised on the upside and rose 0.6% mom in May. But CBI industrial trends disappointed and dropped to -23 in June. Swiss industrial production dropped -7.8% qoq in Q1.

Following up on GBP/CHF the fall from 1.7073 extended further as expected and reaches as low as 1.6431 so far today. Intraday bias remains on the downside and break of lower channel support (now at 1.6336) will confirm our view that choppy recovery from 1.5825 is finished at 1.7073, ahead of 1.7110 resistance. In such case, whole decline from 1.8111 should be resuming for another low below 1.5825.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.1260; (P) 1.1299; (R1) 1.1350;

USD/CHF drops sharply to as low as 1.1125 so far today and at this point, intraday bias remains on the downside for next key cluster level at 1.0922 (61.8% retracement of 1.0434 to 1.1729 at 1.0929). While the correction from 1.1729 is much deeper than expected, we're still treating it as a correction in the medium term up trend and hence strong support should be seen at 1.0897 support to contain down side. On the upside, above 1.1338 will turn intraday bias neutral and bring recovery.

In the bigger picture, as noted before, rise from 0.9916 is treated as resumption of the long term rise from 2008 low of 0.9634. Such rise is expected to have a test on 1.1963/2296 resistance zone first and then 100% projection of 0.9634 to 1.2296 from 0.9916 at 1.2578. On the downside, break of 1.0897 resistance turned support is needed to be the first sign of reversal. Otherwise, we'll stay bullish.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised 07:15 CHF Industrial Production Q/Q Q1 -7.80% -6.30% 6.40% 07:30 CHF SNB Interest Rate Decision 0.25% 0.25% 0.25% 08:00 EUR ECB Monthly Bulletin -- -- 08:30 GBP Retail Sales M/M May 0.60% 0.10% 0.30% 0.00% 10:00 GBP U.K. CBI Industrial Trends Jun -23 -15 -18 12:30 CAD Wholesale Sales M/M Apr 0.40% 1.40% 12:30 USD CPI M/M May -0.20% -0.20% -0.10% 12:30 USD CPI Y/Y May 2.00% 2.00% 2.20% 12:30 USD CPI Core M/M May 0.10% 0.10% 0.00% 12:30 USD CPI Core Y/Y May 0.90% 0.90% 0.90% 12:30 USD Current Account Balance Q1 -109B -$120.0B -$115.6B -100.9B 12:30 USD Initial Jobless Claims 472K 452K 456K 14:00 USD Philadelphia Fed. Survey Jun 21 21.4 14:00 USD Leading Indicators May 0.40% -0.10% 14:30 USD Natural Gas Storage 86B 99B