Dollar continues to stay in tight range against Euro in early US session as markets are waiting for FOMC statement later today. The greenback pulled back mildly earlier today on recovery in gold and crude oil but pares some losses as the day goes. Headline CPI in US rose 1.8% yoy in November on higher energy costs and small based effect. Nevertheless, core CPI was unchanged at 1.7% yoy. Housing starts rebounded back to 574k annualized rate while building permits rebounded to 552k annualized rate.

Sterling was lifted by better than expected employment report today. While unemployment rate climbed to 7.9% in October, claimant count unexpected dropped by -6.3k in November versus expectation of 13.9k rise. Also, claimant count rate dropped from 5.1% to 5.0% in November. Eurozone CPI rose less than expected by 0.1% mom, 0.5% yoy in November. Manufacturing and Services PMI both posted slight improvements to 51.6 and 53.7 in December respectively. Aussie remains soft as Australian GDP reported today was disappointing, showing 0.2% qoq, 0.5% yoy growth in Q3 comparing to expectations of 0.4% qoq, 0.7% yoy.

Focus now turns to FOMC statement. The stronger-than-expected employment report in November triggered speculations that the Fed will hike its policy rate earlier than previously anticipated. This also led to a fight back in the dollar. However, one month's optimistic data is not going to alter policymakers' stance significantly. Therefore, there will likely be minor change in the FOMC statement and Chairman Bernanke will announce to keep the Fed funds rate at 0-0.25% for an extended period of time. Nevertheless, Fed will acknowledge positive economic development in recent weeks such as noting that the labor market and the financial market has improved.

Looking at the dollar index, the break of 76.82 resistance and sustained trading above 55 days EMA confirms that a medium term bottom is in place at 74.10 already. We're remain bullish on the dollar index as long as 75.58 resistance turned support holds. Further rise is expected to be seen to 38.2% retracement of 89.62 to 74.19 at 80.08, as a correction to fall from 89.62, in the least bullish scenario.

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EUR/GBP Mid-Day Outlook

Daily Pivots: (S1) 0.8908; (P) 0.8954; (R1) 0.8980; More.

EUR/GBP's fall from 0.9153 extends further today ans reaches as low as 0.8882 so far. Intraday bias remians on the downside for 0.8830 low and possibly further to 61.8% projection of 0.9410 to 0.8833 from 0.9153 at 0.8786 as whole correction from 0.9410 continues. Nevertheless, focus will be on reversal signal again as EUR/GBP re-enters into 0.8704/8837 support zone. On the upside, above 0.8961 minor resistance will turn intraday bias neutral again. But risk will remain on the downside as long as 0.9153 resistance holds.

In the bigger picture, medium term correction from 0.9799 has completed with three waves down to 0.8399 already and rise from there is tentatively treated as resumption of long term up trend. Such rise should target a test on 0.9799 first after completing the correction from 0.9410, which should b contained by 0.8704 support. Break of 9799 will bring rally to next medium term target at 61.8% projection of 0.6535 to 0.9799 from 0.8399 at 1.0416. We'll hold on to this bullish view as long as 0.8704 support holds.

EUR/GBP