Dollar continues to be pressured across the board, with the dollar index edged to new low of 76.01 so far. Recovery of the greenback was brief and markets quickly turned back to risk seeking mode. US stocks open higher, with DOW back above 9800 level, following broad base rally in European equities. Commodities are firm with gold extending rebound to as high as 1021.5 and crude oil rose back to as high as 71.70. It looks like the greenback will remain soft until tomorrow's FOMC announcement.
Canadian retail sales released in US session showed unexpected contraction of -0.8% mom in July while ex-auto sales also contracted -0.6% mom. USD/CAD recovers mildly after the report but lacked sustainable momentum as the greenback is broadly pressured. EUR/CAD is also staying in familiar range. Nevertheless, the corrective rise from 1.5183 might be near term completion. Bounce of from the key trend line resistance, which EUR/CAD is pressing now, followed by break of 1.5619 support will likely trigger some sharp selloff in the cross.
New Zealand dollar is the strongest among major currencies lifted by report showing current account balance recorded first surplus of NZD 0.12B in six years in Q2. Strength in Kiwi is felt around the board with NZD/USD breaking recent high of 0.7156 and rose sharply to as high as 0.7241 so far. The NZD /USD should be extending recent up trend to 100% projection of 0.5486 to 0.6519 from 0.6193 at 0.7298 next. Focus will turn to GDP report in the coming Asian session. While consensus forecast New Zealand's GDP contracted -0.2% qoq in 2Q09 after a -1% decline in the prior quarter, risk is on the upside that a first rise since the end of 2007 may have been recorded. If that's the case, then it did not only mark the end of recession but also suggested that recovery has arrived earlier than the RBNZ's forecast.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0277; (P) 1.0333; (R1) 1.0376; More
USD/CHF's fall extends further to as low as 1.0221 so far today. As discussed before, further decline is still expected as long as 1.0388 resistance holds. USD/CHF should now be targeting 61.8% projection of 1.1740 to 1.0590 from 1.0883 at 1.0172. On the upside, break of 1.0388 resistance indicate that a short term bottom is at least formed and stronger rebound should be seen to test 1.0530 support turned resistance.
In the bigger picture, whole set of price actions from 1.2296 are treated as correction to the medium term rally from 2008 low of 0.9634. Fall from 1.1963 is the third wave of such correction and should be in the last stage of the five wave sequence (1.1158, 1.1740, 1.0590, 1.0883, ?). Current development suggests that fall from 1.1963 is much deeper than we originally expected and could extend far beyond 1.0366 support. Though, we'd continue to look for loss of momentum and reversal signal as USD/CHF approaches next key cluster support level of 1.001, 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity. On the upside, break of 1.0530 resistance will be the an important signal that USD/CHF has finally reversed and further break of 1.1021 resistance will confirm.