Dollar's selloff continues throughout the day with dollar index breaking through 74.94 low made in October to as low as 74.93 so far. Dollar continue to be weighed down by IMF comments, G20 pledge to continue stimulus, return of risk appetite as well as strength in gold. Gold breaks 1100 level to new record high of 1111.7 and remains strong. Crude oil also rebounded strongly and is heading towards 80 level. Commodity currencies are the biggest winner as the week starts.
In its Global Economic Prospects and Principles for Policy Exit, IMF said that dollar still remains on the strong side even though it moved closer to medium-run equilibrium. It also note that credit spreads in US, European and Emerging Markets are now back to pre-crisis level. But there are still under capitalization, impaired legacy assets and non-performing loans in the markets. Economy will remain dependent on public sector support.
Global stocks are generally higher as G20Finance Ministers agreed to continue fiscal stimulus until sustainable recovery is clearly seen. G20 said that so far economic recovery was uneven and remains dependent on policy support. US Treasury Geithner said that unemployment rate of 10.2%showed it's still a very tough economic environment, the ultimate cost of early exit from stimulus will be greater Also, the finance ministers agreed to submit their economic plans for assessment by G20, IMF and the World Bank to ensure they're working for generating balanced growth.
Data released today saw german trade surplus narrowed to 9.9B Euro in September. Industrial production rose more than expected by 2.7% mom. Eurozone Sentix Investor Confidence improved to -7 in October.
Looking at the dollar index, the break of 74.94 support today invalidated the view that it's bottomed. Instead, whole medium term fall from 89.62 is still in progress. Short term outlook will remain bearish as long as 76.82 resistance holds and further decline should be seen to next medium term support at 74.31.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4801; (P) 1.4857; (R1) 1.4901; More
EUR/USD's strong rebound from 1.4626 extends further to as high as 1.5019 so far. At this point, intraday bias remains on the upside and further rise should be seen to 1.5061 high. Break there will confirm that whole medium term rally has resumed and should target upper trend line resistance at 1.5539 next. On the downside,below 1.4954 will turn intraday bias neutral first. But another rise is still in favor as long as 1.4814 support holds.
In the bigger picture, dollar index's break of 74.94 low today suggests that dollar has not bottomed yet and could be translated new high in EUR/USD. Break of 1.5061 high will indicate that medium term rise from 1.2456 has resumed and could target a retest of 1.6039 high next. On the downside, break of 1.4626 support is needed to be the first signal that EUR/USD topped out in medium term. Otherwise, outlook will remain bullish.