Risk aversion is set to continue in early US session after poor durable goods orders data. Headline orders rose a mere 0.3% in July comparing to 3.0% expectation. Ex-transport orders are even worse and dropped -3.8%. European stocks failed to hold on to earlier gains and turned red. More weakness is anticipated together with a lower open in US equities in case of more downside surprises in housing data. Canadian dollar and Australian dollar break yesterday's high as trades sell risks. Though, European majors are still steady against dollar and yen.
German Ifo business climate unexpectedly improved from 106.2 to 106.7 in August. Expectations dropped to 105.2 but was better than expectation of 104.3. However, the data provided little boost to Euro. EUR/CHF breached 1.3 psychological level as Ireland's credit rating was cut one step by S&P to AA- about the increase bank rescue costs. S&P said in a statement that A further downgrade is possible if the fiscal cost of supporting the banking sector rises further, or if other adverse economic developments weaken the government's ability to meet its medium-term fiscal objectives. However, one important thing to note is that the common currency is somewhat resilient against dollar as the greenback is hurt by gold's return to strength. The inter-relationship between Euro, Dollar and Gold will be another major development in near term in addition to yen's one-sided strength.
Yen continues to consolidate in tight range as intervention talk resurfaced. Prime Minister Kan and Finance Minister Noda met today while Noda also stepped up the rhetoric, pledging to take appropriate action on recent one-sided move in the currency. However, markets were again disappointed as nothing concrete was concluded after the meeting. Indeed Noda told reports that the meeting was mainly focused on economic analysis rather than specific address on yen's rise. Though, it's believed that BoJ, on the other hand, might be ready to implement additional measures to loosen monetary policy further to ease the negative impact of yen on the export-led economy, in particular if there proves to be sharp deterioration in business sentiment.
Dollar index continues to consolidate around 83.45 cluster resistance for the moment and intraday bias remains neutral. Some more sideway trading could still be seen but after all, outlook remains bullish as long as 81.92 support holds. As noted before, we're favoring the case that whole correction from 88.70 has finished at 80.08. Sustained trading above 83.45 will confirm this case and target 61.8% retracement at 85.40 at least. However, break of 81.92 will dampen this bullish view and argue that rebound from 80.08 is possibly just a correction and another test on 80 psychological level could possibly be seen in such case.
AUD/USD Mid-Day Outlook
Daily Pivots: (S1) 0.8769; (P) 0.8842; (R1) 0.8888; More
AUD/USD's fall extends further to as low as 0.8779 so far in early US session. Intraday bias remains on the downside and deeper decline should be seen to lower channel support (now at 0.8737). As noted before, decisive break there will indicate that whole choppy rise from 0.8066 is finished too and deeper fall should then be seen to retest this support level next. On the upside, above 0.8895 minor resistance will turn intraday bias neutral first. But outlook will remain bearish as long as 0.9078 resistance holds.
In the bigger picture, no change in the view that price actions from 0.9404 are consolidations/correction to medium term up trend from 0.6008. Rebound from 0.8066 is treated as the second leg inside such consolidation. Hence even in case of another rise, we'd expect strong resistance neat to 0.9404 to limit upside and bring another fall to continue the consolidation. On the downside, break of 0.8315 support will suggest that whole correction is going to extend deeper to beyond 0.8066 support, possibly to 0.7702 key support before completion.