Dollar resumes recent fall while yen weakens sharply against European majors as risk appetite remains resilient. On the other hand, Sterling maintains earlier strength after BoE minutes and climbs further broadly. Stocks in US open higher as Morgan Stanley's profit beats estimates while crude oil and oil recovers from intraday low.
Sterling was boosted higher by an upbeat BoE minutes which showed unanimous vote to keep rates and the asset purchase program unchanged in October's meeting. The minutes cleared speculations that there were debates within the MPC on whether to extend the QE program. On the other hand, the upbeat comments on positive developments in the economy injected some confidence into the markets. Sterling rose sharply across the board and remains firm in early US session.
GBP/CHF's break of 1.6729 resistance suggests that a short term bottom is formed at 1.6115 and strong rebound should now be seen to 55 days EMA (now at 1.6893) and possibly above. Nevertheless, upside should be limited by 61.8% retracement of 1.8111 to 1.6115 at 1.7349 and bring fall resumption. There is no change in the view that medium term rebound from 1.5111 has completed and long term down trend is resuming.
Kiwi was lifted mildly earlier today by hawkish comments from RBNZ Governor Bollard that high Kiwi wasn't necessarily an impediment to hiking the OCR given rising house prices. Markets initially interpreted that as a hint on rate hike. Nevertheless, there were some reassessment that RBNZ will still leave rates unchanged at least till next March. Kiwi turns sideway after initial rise.
With 75.90 minor resistance intact, dollar index's down trend is still in progress and a new low below 75.10 could be seen. However, bullish convergence is clearly seen in 4 hours MACD and RSI which indicates diminishing downside momentum. Downside would likely be contained by lower trend line support (now at 74.91) and bring strong rebound. Above 75.90 will argue that dollar index has bottomed out and will bring stronger rise to test upper trend line resistance (now at 76.72) first.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0076; (P) 1.0121; (R1) 1.0161; More
USD/CHF's fall resumes after brief recovery and drops to as low as 1.0066 so far. Further decline is still expected to 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity. However, note that downside momentum is diminishing mildly with bullish convergence condition in 4 hours MACD. Downside could be contained there initially and bring strong rebound. Break of 1.0156 minor resistance will indicate that a short term bottom is at least formed and stronger rebound should then be seen towards 1.0452 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, ?). With 1.0452 resistance intact, there is no indication of bottoming yet. Nevertheless, USD/CHF should 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. However, sustained break there will target 0.9634 low next.
On the upside, break of 1.0452 resistance will have the medium term falling channel resistance taken out firm. This will be an important signal that fall whole fall from 1.1963 has completed and will turn focus back to 1.0883 resistance for confirmation. Also, this will argue that whole consolidation pattern from 1.2296 has finished too. We'll be looking at the prospect of much stronger medium term rally in such case.