Dollar remains soft in spite of better than expected retail sales report. Sterling recovers mildly after employment data but momentum is mild so far. Crude oil and gold retreats mildly after earlier rally. Japanese yen, on the other hand, is sharply lower on news that JPMorgan Chase & Co. Q3 earnings that beat estimates. At this moment, more downside is still in favor in the greenback in near term. Nevertheless, the Japanese yen may be catching up on improved risk appetite.
Talking about yen crosses, AUD/JPY is now back pressing 89.98 high and recent development indicates that medium term rally from 55.53 is still in progress. Break of 81.98 will target 61.8% projection of 70.74 to 91.98 from 76.32 at 82.26 next. Break of 78.55 support is needed to be the first sign of topping. Otherwise, outlook will remain bullish.
Headline retail sales in US dropped less than expected by -1.5% in September. Ex-auto sales, on the other hand, rose 0.5% versus consensus of 0.2%. UK job market showed some sign of stabilization. Unemployment rate was unchanged at 7.9% in August. Claimant count also rose less than expected by 20.8k in September. Eurozone production rose 0.9% mom in AUgust versus consensus of 1.2%.
BoJ left the target rate unchanged at 0.1% today on unanimous vote. In the accompanying statement, the bank said that economy has started to pick up. and the need for funding measures has diminished. Nevertheless, the back refrained from hinting on when it would end the emergency measures like corporate debt purchases. Domestic CGPI in Japan rose 0.1% mom in September. Household confidence improved slightly to 40.5.
Next focus will be FOMC minutes. Dollar was sold off on comments from Fed Vice Chairman Kohn that interest rates will remain low for an extended period. At last meeting, FOMC unveiled a more optimistic outlook on economic recovery. 'Economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales'. However, inflation outlook was expected to remain subdued for some time. In the minutes, we will look for any discussion on the exit strategy.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4786; (P) 1.4831; (R1) 1.4900; More
EUR/USD rises further to 1.4918 so far today and intraday bias remains on the upside for the moment. Current rally could extend further towards 1.5 psychological resistance next. On the downside, below 1.4835 minor support will turn intraday bias neutral first and bring retreat. But short term outlook remains bullish as long as 1.4671 support holds.
In the bigger picture, current development argues that medium term rise from 1.2456 is developing into stronger rally than originally expected. Sustained trading above 1.5 psychological level will pave the way or retreating 1.6039 record high in medium term. Nevertheless, note that that upside momentum remains unconvincing with mild bearish divergence conditions in daily MACD. A break below 1.4483 support will be the first signal that whole rise from 1.2456 has completed and will turn outlook bearish for deeper fall towards 1.2884/3737 support zone first.