Dollar and yen continue to consolidate against major currencies as equities stabilize above last week's low. US stocks open mildly higher but so far the strength for rebound is weak. We'd like to point out that the retreat in dollar and yen today is so far very weak and the price actions remain corrective in nature. In other words, markets are merely consolidating recent gains in both currencies and further rise is still in favor after the current consolidations. Indeed, USD/CAD takes the lead today as crude oil fails to stage a meaningful rebound and and is still soft at around 74.5 level.
Investors are calmed by news over the weekend that the situation for Fed chairman Bernanke to win the vote for second term became more optimistic. Senate Republican leader Mitch McConnell said in a interview that Bernanke will have bipartisan support in the Senate. Intrade, a Web exchange for futures contracts based on political outcomes, today saw 95% odds Bernanke would be confirmed, up from 88% on Jan. 23. A senate vote on Bernanke's confirmation will be held this week and Bernanke will need to 60 votes to avoid procedural hurdle.
On the data front, Australia PPI unexpectedly dropped -0.1% qoq in Q4. German Gfk consumer sentiment for February dropped to 3.2. Existing home sales dropped much more than expected to 5.45M annualized rate in December.
One thing to note is that the dramatic turn in risk sentiments has sent the NZDJPY sharply lower last week. It's indeed to worst performer this month and is down over -4.75%. It's still early to conclude whether medium term rise from 44.19 has completed. But near term weakness is anticipated and we'd expect to see NZD/JPY to drop further to retest 59.85 cluster support (38.2% retracement of 44.19 to 69.70 at 59.95). The selloff could either be triggered by further selloff in equities or a dovish RBNZ later this week.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0373; (P) 1.0409; (R1) 1.0444; More
USD/CHF's retreat from 1.0494 is still in progress and another fall to 4 hours 55 EMA (now at 1.0343) cannot be ruled out. But after all, downside is expected to be contained above 1.0291 resistance turned support and bring rally resumption. As noted before, current development indicates that whole rise from 0.9919 should be resuming. Break of 1.0506 will target 1.0590 medium term support turned resistance next.
In the bigger picture, medium term fall from 1.1963 has completed with five waves down to 0.9916 already, on bullish convergence condition in daily MACD. Also, the three wave consolidation from 1.2296 should be finished too. Current rise from 0.9916 is expected to extend further to medium term trend line resistance first (now at 1.0996). Sustained trading above the trend line will affirm the case that long term rise from 2008 low of 0.9634 is resuming for another high above 1.2296. On the downside however, a break of 1.0131 support will invalidate this bullish view and argue that medium term down trend in USD/CHF is still in progress for another low below 0.9916.