Dollar falls sharply in early US session against Euro and Swissy after brief consolidations and the dollar index breaches 77 level. Gold continues to staying range around 1000 level and further rally to 1033.9 high is still likely after brief consolidation. On the other hand crude oil rises further on expectation that OPEC will keep output policy unchanged and is just shy of 72 level. Chicago Fed Evans said in a speech today that it's still early to start removing Fed's policy accommodation. Evens said that it's unlikely the US will enter into harmful deflationary episode or a repetition of the Great Inflation.

Commodity currencies and Sterling lag behind Euro's strength. AUD/USD is still trading below yesterday's high at the time of writing, so is Canadian dollar even though Canada housing starts beat expectation. EUR/GBP is set to take on last week's high of 0.8837 and to resume recent rally from 0.8399. Euro commodity crosses are staying in familiar range. Looking at EUR/CAD, while there is no change in the down trend from 1.7499 yet, more upside is slightly in favor in the cross as consolidation from 1.5183 continues.

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On the data front, Canadian housing starts rose more than expected to 150k in August. US trade deficit narrowed slightly to GBP -6.479b in July. Nevertheless, export has strongest rise since Jan 2008 by 5% while exports has strongest rise in a year by 4.5%. The data is consistent with the view that the European economy is improving. Also released today, UK nationwide consumer confidence rose more than expected to 63 in August. German CPI was confirmed to be 0.2% mom, 0.0% yoy in August. Japanese leading indicate rose more than expected to 83 in July. Australian retail sales unexpectedly fell for the second consecutive months by -1.0% mom in July versus expectation of 0.6% rise. Fed's Beige Book will be the next focus.

Looking ahead, RBNZ will announce rate decisions in the coming session and is expected to leave the OCR unchanged at 2.5%. Focus will be on the tone of the accompanying statement of whether there will be a change from dovish to a more neutral one. More in Central Banks Previews - RBNZ, BoE, BoC.

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Looking at the dollar index, fall resumes after brief consolidation and reaches as low as 76.90 so far. At this point, intraday bias remains on the downside as long as 77.44 minor resistance holds and further fall should be seen towards 75.89 key support. As noted before, sustained trading below 77.43 confirms that whole decline from March high of 89.62 has resumed. Nevertheless, strong support should be seen there to at least bring a sizeable short term rebound. Above 77.44 will bring recovery first but upside should be limited below 78.93 and bring another fall.

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USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0401; (P) 1.0502; (R1) 1.0572; More

USD/CHF's fall resumes after brief consolidation and reaches as low as 1.0400 in early US session. At this point, intraday bias remains on the downside for mentioned lower trend line support (now at 1.0381). But strong support is anticipated at 1.0366 to bring strong rebound. On the upside, above 1.0488 minor resistance will turn intraday outlook neutral first. Nevertheless, break of 1.0714 resistance is needed to indicate that USD/CHF has bottomed out. Otherwise, another fall is mildly in favor.

In the bigger picture, there is no change in the outlook of USD/CHF. Firstly, the fall from 1.1963 should be in form of a five wave sequence where current decline from 1.1201 is the fifth wave. Secondly, fall from 1.1963 is treated as the third leg of the consolidation pattern that started at 1.2296. While such fall is still in progress, strong support should be seen around 1.0366 key level and bring strong rebound to conclude both the fall from 1.1963 as well as the consolidation from 1.2296.

On the upside, break of 1.0883 resistance will be the an important signal that USD/CHF has reversed and further break of 1.1021 resistance will confirm. However, sustained trading below 1.0366 will invalidate this view and deeper decline could then be seen to 100% projection of 1.2296 to 1.0366 from 1.1963 at 1.0033 next, which is in proximity to parity.

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