Euro remains in tight range after ECB cut interest rates by another 50bps to 2.00% today on unanimous vote. In the post meeting press conference, Trichet said that demand in the Eurozone will be dampened by the financial market turmoil for a protracted period of time and uncertainties remain exceptionally high. Inflationary pressures have diminished significantly. Risks to price stability in medium term is broadly balanced even though inflation rate could fluctuate sharply in near term. The steadiness in Euro, is probably because Trichet has mentioned that ECB's meeting in Feb is not important. March is expected to be the 'important' one as more new information will become available. This is taken as a signal that ECB will be on hold in Feb. However, this could just mean another big cut in March if the coming data are as bad as economists expect. Hence, after all, risk of Euro should remain on the downside. Also released today, Final Eurozone HICP was unrevised at -0.1% mom, 1.6% yoy in Dec. Final Germany HICP was unrevised at 0.4% mom, 1.1% yoy in Dec.
On the other hand, dollar remains in tight range after another round of data from US. Jobless claims was back above 500k at 524k. Empire state manufacturing index improved from downwardly revised -27.88 to -22.2. PPI dropped -1.9% mom, -0.9% yoy in Dec, first annual drop in seven years. Core PPI rose 0.2% mom, 4.3% yoy. Dollar index edges higher to 84.81 but settles back into today's range quickly. Though, short term outlook will remain bullish as long as 83.44 support holds and current rise is still expected to extend to retest 88.46 high.
Released earlier, Japan's domestic CGPI plunged -1.2% in December, slightly better than market expectation of -1.5% and -1.9% in November. Moreover, the nation's private sector machinery orders dropped -16.2% in November, worse than consensus of -8% and -4.4% in October, as corporate reduced investment due to economic crisis. In Australia, employment dropped -1.2K in December, less than -20K as expected and a revised -16.2K in November. However, full time positions declined severely by -43.9K, the biggest drop in 5 years, and unemployment rate increased to from 4.4% to 4.5%.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.1132; (P) 1.1192; (R1) 1.1249
USD/CHF strengthens mildly in early US session and is back pressing 1.1277 resistance. Rise from 1.0366 might be resuming and at this point, intraday bias remains on the upside as long as 1.1093 minor support holds. Above 1.1277 will bring further rally to 61.8% retracement of 1.2296 to 1.0366 at 1.1559. Though upside is expected to be limited there to break resumption of whole fall from 1.2296. On the downside, below 1.1093 will turn intraday outlook neutral again. Further break below 1.0864 will flip intraday bias back to the downside again for retesting 1.0366 low
In the bigger picture, the five wave structure of the decline from 1.2296 to 1.0366 is arguing that whole medium term rebound from 0.9634 has completed already. While a short term bottom is in place at 1.0366, rebound from there should be limited by 61.8% retracement of 1.2296 to 1.0366 at 1.1559 and bring fall resumption. Below 1.0366 will target 1.0010 first and then 0.9634 low. Sustained trading above 1.1559 fibo resistance is needed to invalidate the bearish case and put focus back to 1.2296 high.