Dollar and Yen remain firm in early US session and are lifted mildly as stocks turn red against after release of worse than expected new home sales data form US. New home sales miss expectation and dropped to 402k in September. Released earlier, headline durable goods orders in US rose by 1.0% in September, fourth rises in six months. Ex-transport orders also rose strongly by 0.9%, above expectation of 0.7%.
Other data released today saw Japanese retail sales dropped -1.4% yoy in September, slightly better than expectation of -1.5%. Australian CPI rose more than expected by 1.0% qoq in Q3, slightly more than expectation of 0.9%. Year-over-year rate also slowed less than expected to 1.3%. German import price index dropped more than expected by -0.9% in September.
Dollar index's rebound halts after hitting near term falling trend line resistance. Nevertheless, intraday bias remains on the upside as long as 75.76 minor support holds. Sustained trading above the trend line resistance will confirm that a short term bottom is already formed at 74.94 on bullish convergence conditions in 4 hours MACD. Stronger rally should then be seen to 77.47 next. However, note that a break below 75.76 minor support will flip intraday bias back to the downside and argue that another low below 74.94 might be seen before dollar index bottoms.
The biggest obstacle for dollar to extend this week's rebound might be found in gold. So far, further decline is still expected as long as 1044.4 minor resistance holds. However, note that a break above 1044.4 will argue that fall from 1068.8 has completed a five wave sequence. This will in turn argue that the three wave correction from 1072 has completed and would bring stronger rebound. Hence, a break of 1044.4 minor resistance in gold would probably trigger some selling in the greenback.
RBNZ rate decision will be a major focus in the coming Asian session. While the RBNZ will likely keep its OCR unchanged at 2.5%, the tone of the accompanying statement should turn more neutral than before. In previous meetings, the central bank stated 'we continue to expect to keep the OCR at or below the current level through until the latter part of 2010'. We expect the part 'or below' will be eliminated this time. The above forecast was based on recent strong economic data in New Zealand as well as RBNZ governor Alan Bollard's comments about rate hike and exchange rates.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4740; (P) 1.4833; (R1) 1.4897; More
At this point intraday bias in EUR/USD remains on the downside with 1.4841 minor resistance intact. A short term top is at least formed at 1.5061 on bearish divergence conditions in 4 hours MACD and RSI. Further decline should be seen to 1.4483 support first. On the upside, above 1.4841 minor resistance will turn intraday outlook neutral and bring consolidation. But risk will now remain on the downside as long as 1.5061 resistance holds.
In the bigger picture, the case of topping in EUR/USD is starting to build up with focus now on 1.4483 support. Break there will indicate that whole rise from 1.2456 has finished with bearish divergence conditions in daily MACD. Further break of 38.2% retracement of 1.2456 to 1.5061 at 1.4066 will confirm this case and bring deeper decline to 61.8% retracement at 1.3451 and below.
On the upside, above 1.5061 will suggest that rise from 1.2456 is still in progress and further rally might be seen towards 1.6039 high. However, the whole set of price actions from 1.2329 look is viewed as part of wide range consolidation that started at 1.6039. Hence, upside of the current rise should be limited below this 1.6039 key resistance and bring at least one more medium term fall to complete the consolidation pattern.