Dollar's sold off resumes in early US session and extends recent weakness against most major currencies, in particular Sterling and Kiwi. Traders resume selling the greenback ahead of key events of tomorrow which include Bernanke's Testimony, Geithner's announcement of bank rescue plan as well as Senate vote of Obama's stimulus package. There is also some selling triggered by talk of Geithner's communications on cooperation with China's Wang ahead of G7 meeting. Dollar is also pressured mildly by crude oil's rebound to above 41 level. Nevertheless, note that EUR/USD, USD/CHF, USD/CAD and the dollar index are staying in familiar range. Dollar's weakness will probably be more apparent against Sterling, Aussie and Kiwi.

On the data front, Canadian housing starts dropped more than expected to 153.5k in Jan. The Eurozone's Sentix investors confidence plunged to -36.1 in February, much worse than market expectation of -31.2 and -34.4 in January. Both the investor morale component and current condition component dropped more seriously than consensus but the expectations component rose to -18.25 from 31.5 in January. Germany trade surplus narrowed to 6.8b euro in Dec, below expectation of 8.0b. Current account surplus widened to 12.3b versus expectation of 7.8b. Import dropped -4.1% while export dropped -3.7%, both less than expectation. From Japan, machinery orders dropped -1.7% mom in December (consensus: down -8.8%), the 3rd consecutive monthly decline, from a record of -16.2% fall in November as companies cancelled or delayed capex plans as a result of deepened recession. Moreover, the country's current account surplus narrowed to 498.5B yen in December from 654.1B yen a month ago as exports continued to tumble. Trade deficit widened to -197.9B yen, more than market expectation of -175.9B yen and -93.4B yen in the previous month.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4634; (P) 1.4739; (R1) 1.4889; More

GBP/USD's rally is still in progress and reaches as high as 1.4976 in early US session. At this point, intraday bias remains on the upside as long as 1.4699 minor support holds. As discussed before, current rise from 1.3503 could extend further to as 100% projection of 1.3503 to 1.4542 from 1.4051 at 1.4693 and probably further to 1.5722 medium term resistance. On the downside, below 1.4669 will be an early alert that rebound from 1.3503 has completed and turn short term outlook neutral first. Further break of 1.4051 will bring retest of 1.3503 low.

In the bigger picture, GBP/USD should have completed the five wave sequence from 2.0158 (1.7445, 1.8668, 1.4557, 1.5722), with fifth wave terminated at 1.3503. A medium term bottom is in place there with bullish convergence condition in daily MACD and RSI. Further rebound could be seen to 1.5722 or further to 38.2% retracement of 2.0158 to 1.3503 at 1.6045 to correct the medium term fall. However, note that the decline from 2.1161 is expected to develop into a five wave sequence, (1.9337, 2.0158, 1.3503) with third wave completed at 1.3503. In other words, price actions from 1.3503 are probably the fourth wave consolidations only. Hence, strong resistance should be seen between 1.5722 and 1.6045 and another fall should be seen to a new low below 1.3503 before completing the five waves move from 2.1161.