Dollar's selloff accelerates after taking out near term support level against major currencies. Euro, Swissy and Aussie, break to new high against the greenback while dollar index took out 2009 low made in August. Rally in stocks give the greenback some pressure but it should be the strength in precious metals that really drives the dollar down. Adding to that, crude oil 's strong rebound from medium term trend line support adds further pressure to the dollar. More downside should be seen in dollar as gold heads towards 1033.9 high and as oil retests 75.0 resistance.
On the data front, Sterling was lifted mildly in crosses on better than expectation production data from UK. Industrial production rose 0.5% mom while manufacturing production rose 0.9% mom versus expectation of 0.2% and 0.3% respectively. On the other hand, German industrial production unexpectedly dropped -0.9% mom in July. German trade surplus widened more than expected to 13.9b euro. Swiss unemployment rate rose less than expected to 4.0% in August. Canadian building permits dropped sharply by -11.4% in July. Japanese current account surplus narrowed to 1.16T in July. Eco watch survey: current dropped from 42.4 to 41.7 in August. Australia NAB business confidence improved from 10 to 18 in August.
Looking at the dollar index, the break of 77.43 low confirms that whole decline from 89.62 has resumed. Further fall should now be seen towards 75.89 key support level. Nevertheless, note that our view that that fall from 89.62 is developing into a five wave sequent with the current decline as the fifth wave. Also, such decline is treated as the third leg of consolidation from 88.46. Hence, we'd continue to look for sign of loss of momentum and reversal sign as the index approaches 75.89.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4299; (P) 1.4330; (R1) 1.4362; More
EUR/USD's rally extends further to as high as 1.4506 so far, touches mentioned upper trendline resistance. Break of 1.4446 high confirms that whole rally from 1.2456 has resumed. At this point, intraday bias remains on the upside and further rise could be seen towards 61.8% retracement of 1.6039 to 1.2329 at 1.4622. Nevertheless, we'll continue to look for reversal signal as EUR/USD approaches this fibo resistance. On the downside, below 1.4411 minor support will turn intraday outlook neutral first. But another rise is still in favor as long as 1.4177 support holds.
In the bigger picture, there is no change in the view that rise from 1.2456 is the third leg of the whole consolidation pattern that started at 1.2329. Price actions from 1.3747 may be developing into a diagonal triangle as the fifth wave in such five wave sequence from 1.2456 and should be close to completion. Further rise is still possible after EUR/USD takes out 1.4446 high, but, upside should be limited by 61.8% retracement of 1.6039 to 1.2329 at 1.4622 and finally bring reversal. On the downside, below 1.4177 support will a signal that EUR/USD has already topped out and break of 1.3747 support will be the confirmation. In such case, deeper decline should be seen that sends EUR/USD through 1.2329 low eventually.
Economic Indicators Update
|23:01||GBP||BRC Retail Sales Monitor Aug||-0.10%||--||1.80%|
|23:50||JPY||Current Account Total (JPY) Jul||1.16T||1.41T||1.80T|
|23:50||JPY||Japan Money Stock M2+CD Y/Y Aug||2.80%||2.70%||2.70%|
|01:30||AUD||NAB Business Confidence Aug||18||--||10|
|05:00||JPY||Eco Watchers Survey: Current Aug||41.7||43||42.4|
|05:45||CHF||Unemployment Rate Aug||4.00%||4.10%||3.90%|
|06:00||EUR||German Trade Balance (EUR) Jul||13.9B||11.3B||12.2B||12.1B|
|06:00||EUR||German Current Account (EUR) Jul||11.0B||10.0B||13.3B||13.5B|
|08:30||GBP||Industrial Production M/M Jul||0.50%||0.20%||0.50%||0.60%|
|08:30||GBP||Industrial Production Y/Y Jul||-9.30%||-10.10%||-11.10%||-10.70%|
|08:30||GBP||Manufacturing Production M/M Jul||0.90%||0.30%||0.40%||0.60%|
|08:30||GBP||Manufacturing Production Y/Y Jul||-10.10%||-11.10%||-11.70%||-11.30%|
|10:00||EUR||German Industrial Production M/M Jul||-0.90%||1.60%||-0.10%||-0.80%|
|12:30||CAD||Building Permits M/M Jul||-11.40%||0.50%||1.00%|