The boost from the news of Dubai's bailout by Abu Dhabi was rather brief and markets are generally staying in range for the moment. Dollar index retreats to 76.25 earlier today but recovers in early US session. The greenback is also supported by crude oil's weakness as it hovers below 70 level while Gold lacks any strength for a meaningful rebound. While some more sideway consolidations could be seen in the US session today, dollar is expected to regain strength as the week goes.
Earlier today, dollar pares some recent gains on news that Abu Dhabi is providing $10b to help Dubai World to meet it's obligations. Dubai will use $4.1b to repay an Islamic bond maturing today for Nakhell PJSC, its real-estate unit. The rest of the money will be used to pay trade creditors, contractors, interest expenses and be the working capital through April 2010. The news came in as a relief for the market and sent stocks higher.
According to BoE's Quarterly Bulletin, Chief Economist Spencer Dale said that employment to date has not fallen by as much as we might have feared given the falls in output. A substantial element of the workforce appears to have been able to protect their jobs by accepting slower wage growth. Despite the severe recession, the proportion of households who reported difficulties keeping up with bills and credit commitments had fallen slightly.
On the data front, Japanese Tankan survey was the main focus overnight. The large manufacturers index improved from -33 to -24 in Q4 while the non-manufacturing index rose from -24 to -22. Both were above expectation of -26 and -23 respectively. However, the outlook of capex is bleak as large manufacturers said they'll lower their spending by -28.2% in the fiscal year to March 2010, the biggest drop on record while all large firms plan to cut spending by -13.8%.
Other data saw UK Rightmove House Price dropped -2.2% mom in December. Swiss combined PPI was flat mom in November and dropped -3.3% yoy. Eurozone employment dropped -0.5% qoq in Q3. INdustrial production dropped -0.6% mom, -11.1% yoy in October. Canadian capacity utilization rose slightly to 67.5%.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0264; (P) 1.0315; (R1) 1.0396; More
While some more sideway trading could still be seen in USD/CHF, note that short term outlook remains bullish with 1.0234 support intact. Break of 161.8% projection of 0.9916 to 1.0175 from 0.9959 at 1.0378 will further affirm the bullish case that USD/CHF has bottomed as it shows that rise from 0.9916 is impulsive in nature. Further rally should then be seen to 1.0590 support turned resistance next. On the downside, touching of 1.0234 will argue that a short term top is in place and bring retreat, possibly to 4 hours 55 EMA (now at 1.0199). But downside should be contained by 1.0136 support and bring rally resumption.
In the bigger picture, the break of 1.0337 resistance last week and the sustained trading above 55 days EMA confirms that case that a medium term bottom is in place at 0.9916. In other words, whole fall from 1.1963 should have completed already. Also, the three wave consolidations from 1.2296 should also be finished too. Further rise should be seen to medium term trend line resistance (now at 1.1143) next and sustained there will indicate that whole rise from 0.9634 is resuming for another high above 1.2296. On the downside however, a break of 0.9959 support will invalidate this bullish view and argue that medium term down trend in USD/CHF is still in progress for 0.9634 low.