Dollar recovers in early US session, helped by the reversal in USD/JPY and loss of momentum in Gold. USD/JPY dipped to as low as 88 earlier today but recovers strongly after Japanese Finance Minister Hirohisa Fujii reiterated the stance that the government would intervene if there are abnormal moves in exchange rates. Though, he said that it's at a stage of monitoring the market calmly only. On the other hand, Gold retreats sharply after hitting new record high of 1049.7 and some more selling is seen together with mild weakness in US stocks. As seen in the chart below, Gold is losing upside momentum with mild bearish divergence conditions in hourly MACD and some pull back could be seen to 1025 level, and that will likely give some support to the greenback.
Euro as traders are lightening positions ahead of tomorrow's ECB rate decision and press conference. Swissy is even weaker, as seen in the sharp rebound in EUR/CHF. Data released from Eurozone saw Q2 GDP contraction revised slightly down to -0.2% qoq, -4.8% yoy. Though, German Factory Orders rose more than expected by 1.4% mom, in August following downward revision in July to 3.1%. Swiss unemployment rate rose to 4.1% in September. UK Nationwide consumer confidence rose more than expected to 71 in September. BRC shop price was flat in September. Japan leading indicator rose less that expected to 83.3 in August.
Looking at the dollar index, today's strong recovery suggests that an intraday low is in place at 76.1 and intraday bias is turned neutral for the moment. Focus now turns to 76.99 minor resistance. Break there will indicate that fall form 77.47 has completed and will argue that it's merely a correction to rise form 75.83. This will in turn reaffirm the case that dollar index has already bottomed out at 75.83. Further break of 77.47 will confirm and target 78.93 later in the month. However, a break below 76.10 will turn intraday bias back to the downside again and will serious dampen the case that dollar index has bottomed.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0228; (P) 1.0275; (R1) 1.0315; More
With 4 hours MACD crossed above signal line, an intraday low should be in place at 1.0236 and intraday outlook is turned neutral for the moment. Nevertheless, downside risk remains with 1.0452 resistance intact. Below 1.0236 will flip intraday bias back to the downside first. Further break of 1.0185 will bring fall resumption to 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity. However break of 1.0452 will revive the case that USD/CHF has bottomed out at 1.0185 and will target 1.0530 support turned resistance next.
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 in form of five wave sequence (1.1158, 1.1740, 1.0590, 1.0883, 1.0185?). With 1.0530 resistance intact, there is no confirmation of bottoming yet. Nevertheless, even in case of another fall, USD/CHF should continue to lose downside momentum as it approaches 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 and finally bring reversal. On the upside, break of 1.0530 resistance will be an important signal that USD/CHF has already bottomed after missing 61.8% projection of 1.1740 to 1.0590 from 1.0883 at 1.0172 and will turn focus to 1.1021 resistance for confirmation.