Dollar rebounds strong today as risk appetite recedes on profit taking. European stocks are generally lower after IMF Managing Director Strauss-Kahn said that global recovery will likely be slow even though it's not likely a double-dip. US stocks also open mildly lower. Gold consolidates below the new record high made yesterday at 1144.2. Also, markets seem to be reassessing Bernanke's comment about ensuring that dollar is strong. Nevertheless, the greenback is still limited below near term resistance level against major currencies and thus, there is no change in the bearish outlook yet.
Weaker than expected PPI readings from US indicates that inflationary pressure remains subdued. Headline PPI rose 0.3% mom, dropped -1.9% yoy in October versus expectations of 0.5% mom, -1.7% yoy. PPI core dropped -0.6% mom, rose 0.7% yoy, also far below expectation of 0.1% mom, 1.4% yoy. TIC capital flow increased to USD 40.7B in September. Industrial production rose merely 0.1% in October.
Sterling is relatively steady after slightly higher than expected inflation reading released today. Headline CPI rose 0.2% mom 1.5% yoy in Oct versus consensus of 0.1% mom, 1.7% yoy. Core CPI rose 1.8% yoy versus expectation of 1.7%. BoE Sentance said that UK is returning to growth. BoE is moving from the role of fire- fighters in the recession to a more familiar role -- steering the economy through an upswing underpinned by low inflation.
Other data released today saw Swiss retail sales dropped -1.6% yoy in September. Eurozone trade balance showed EUR 6.8B surplus in September. Japan tertiary industry index dropped -0.5% mom in September.
RBA Minutes said that further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question. The minutes raised questions on whether RBA would hike again in December. And there are speculations that even if RBA does continue the tightening cycle in December, there would be a pause in Q1.
Looking at the dollar index, while the rebound from 74.68 is strong, there is no indication of bottoming yet with 75.76 resistance intact. The index might still drop further to 74.31 key support before concluding the whole medium term fall from 89.63. Nevertheless, a break above 75.76 will indicate that a short term bottom is in place, with bullish convergence conditions in 4 hours MACD. Strong rally should then be seen to 76.82 resistance to confirm this case.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0033; (P) 1.0088; (R1) 1.0129; More
USD/CHF rebounds strongly today and with 4 hours MACD crossed above signal line, intraday bias is turned neutral. Nevertheless, note that with 1.0200 resistance intact, fall from 1.0337 is still in favor to continue. Break of 1.0032 will bring fall resumption to first and then 0.9634 key support. On the upside, however, break of 1.0200 will indicate that whole decline from 1.0337 has completed and will turn bias back to the upside for retesting this resistance.
In the bigger picture, there is no indication of medium term bottoming yet and the fall from 1.1963 might still extend further. Sustained trading below parity will pave the way to retest 2008 low of 0.9634. However, break of 1.0337 resistance will complete a double bottom reversal pattern (1.0032, 1.0034) which will be an important indication that a medium term bottom is formed. In such case, stronger rise should be seen to 1.0590 support turned resistance for confirmation.