Markets remain relatively steady after ECB and BoE rate decisions. Euro is a touch weaker against dollar but there is no sign of reversal yet. The greenback is lifted mildly with the sharp pull back in gold from record high of 1059.6. Crude oil also dropped back to below 70 level. Stocks open higher in early US session and risk appetite would continue to limit recovery of the greenback.
ECB left rates unchanged at 1.00% as widely expected. Trichet said in the press conference that rates are appropriate based on assessment of low inflationary pressure over the medium term. Trichet expects economy recovery to be rather uneven supported by short term by temporary factors by hampered in medium term by balance sheet issues at financial and non-financial institutions. Also, Trichet expressed concern that the strength of Euro will threaten the region's recovery.
BoE left rates at 0.50% as well the GBP 175b asset programs unchanged today. BoE said in a short statement that another month will be taken to complete the announced programs and the scale will continue to be under review. Markets believe that BoE will wait for more information from the November Inflation Report before deciding the path forward. Also Sterling recovers mildly against Euro as there is nothing related to deposit rates cut announced. Focus will turn to MPC minutes to be published on October 21.
On the data front, US initial jobless claims dropped to 521k. German industrial production rose less than expected by 1.7% mom in August. Australia job market expectedly expanded by 40.6k in September. Unemployment rate also unexpectedly dropped to 5.7% versus a rise to 6.0%. Japanese current account surplus widened to 1.23T yen in August. Eco Watchers survey also improved to 43.1 in September.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0270; (P) 1.0314; (R1) 1.0372; More
USD/CHF is still staying in tight range above 1.0236 and intraday outlook remains neutral for the moment. Break of 1.0236 will indicate that fall from 1.0452 has resumed for 1.0185 low first. Break will confirm resumption of medium term down trend and should target 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity. On the upside, note that break of 1.0452 will revive the case that USD/CHF has bottomed out at 1.0185 and will target 1.0530 support turned resistance next.
In the bigger picture, whole set of price actions from 1.2296 are treated as correction to the medium term rally from 2008 low of 0.9634. Fall from 1.1963 is the third wave of such correction in form of five wave sequence (1.1158, 1.1740, 1.0590, 1.0883, 1.0185?). With 1.0530 resistance intact, there is no confirmation of bottoming yet. Nevertheless, even in case of another fall, USD/CHF should continue to lose downside momentum as it approaches key cluster support level of 1.001, 100% projection of 1.2296 to 1.0366 from 1.0883 at 1.0033, which is close to parity and finally bring reversal. On the upside, break of 1.0530 resistance will be an important signal that USD/CHF has already bottomed after missing 61.8% projection of 1.1740 to 1.0590 from 1.0883 at 1.0172 and will turn focus to 1.1021 resistance for confirmation.