Markets are generally staying in tight range today so far. Sterling was sharply lower earlier today on more comments from BoE official about quantitative easing program. But weakness fades as the day goes and the pound recovers mildly. Yen was mixed even though BoJ raised its regional economic assessments and painted a more optimistic picture. Dollar, on the other hand, remains soft as crude oil attempted to break through 79 level earlier today but after all, there is not enough selling to trigger down trend resumption yet. US stocks open mildly higher with DOW back above 10000 mark.
Looking at the dollar index, recovery lost steam ahead of 4 hours 55 EMA and intraday outlook remains neutral for the moment. While some more consolidations cannot be ruled out, short term outlook will remain bearish as long as 76.68 resistance holds and recent decline is still expected to continue. Below 75.21 will bring fall resumption to 74.31 medium term resistance turned support next.
More comments from BoE officials showed some debates on extending the GBP 175b asset purchase program is undergoing in MPC. MPC member Adam Posen was quoted in Sunday Times saying that he's not worried about overshooting inflation right now and hinted he may back an extension of the GBP 175b asset purchase program. Last week, Markets Director Paul Fisher hinted that he'd opt to pause the QE program as results are so far what he'd hoped for. Whether Sterling would extend recent rebound will depend on tough test of BoE minutes and Q3 GDP later this week.
BoJ September meeting minutes showed some policy makers believe that the emergency measures to support corporate fundraising were becoming less important, raising some question that BoJ might end this policy soon. BoJ Governor Shirakawa also said that banks are more willing to lend as Japan's economy picks up. Also BoJ raised its regional economic assessment and said that signs of picking up had appeared throughout the economy.
Economic calendar is rather light today. Rightmove house price in UK rose strongly by 2.8% mom in October. Japan Tertiary industry index rose 0.3% mom in August. Canadian international securities transactions rose to 5.08b in August.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0132; (P) 1.0178; (R1) 1.0226; More
USD/CHF's sharp fall earlier today indicates that recovery from 1.0117 might have completed at 1.0227 already. Break of 1.0117 will confirm that recent decline has resumed 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, above 1.0227 will bring more consolidations first but short term outlook will remain bearish as long as 1.0358 resistance holds and recent decline is still expected to extend further.
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, ?). With 1.0452 resistance intact, there is no indication of bottoming yet. Nevertheless, USD/CHF should 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 1.0452 resistance will have the medium term falling channel resistance taken out firm. This will be an important signal that fall whole fall from 1.1963 has completed and will turn focus back to 1.0883 resistance for confirmation. Also, this will argue that whole consolidation pattern from 1.2296 has finished too. We'll be looking at the prospect of much stronger medium term rally in such case.