Swiss Franc spikes lower after SNB left rates unchanged and pledged it will continue to counter appreciation of the franc. The three-month Libor was left unchanged at 0.25% as widely expected. SNB noted in the accompanying statement that there are still considerable uncertainty as to future developments and hence SNB opted for caution to leave rates unchanged. Regarding currency policy, the bank reiterated that it will continue to act decisively to prevent any appreciation of the Swiss franc against the euro. After all, the Swissy settled back into familiar range after initial knee-jerk reactions.

BoJ left overnight lending rate at 0.1% on unanimous vote as widely expected. The asset-buying program and emergency lending program to banks and corporations are also kept unchanged. In the accompanying statement, BoJ upgraded assessment of the economy from stopped worsening to showing signs of recovery and called for growth to begin in second half of 2009 fiscal year. The bank cited a rebound in exports and public spending as underpinning a recovery, but pointed to weak consumer spending and surging unemployment as risks.

Elsewhere, dollar tries to recover mildly following retreat in gold and crude oil. Data from US saw some further improvements in the housing markets. Housing starts rose slightly to 598k annualized rate in August while building permits rose to 579k annualized rate. Initial jobless claims also dropped slightly to 545k.

Released from Canada, headline CPI was flat mom in August comparing to expectation of 0.2% rise. Core CPI rose 0.1% mom, inline with consensus. Leading indicators rose more than expected by 1.1% mom in August.

Released earlier today, UK retail sales was flat mom in August, below expectation of 0.2% rise. Yoy rate was down from revised 2.9% to 2.1%. CPI industrial orders improved more than expected to -48 in September tough.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0306; (P) 1.0362; (R1) 1.0401; More

USD/CHF recovers again after 1.0284 but yet, as long as 1.0489 resistance holds, further decline is still in favor. Further fall could still be seen to 61.8% projection of 1.1740 to 1.0590 from 1.0883 at 1.0172. However, break of 1.0489 will be an important signal that USD/CHF has bottomed out and will turn short term outlook bullish for 1.0714 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 and should be in the last stage of the five wave sequence (1.1158, 1.1740, 1.0590, 1.0883, ?). While we're still holding on to such view, current development suggests that fall from 1.1963 is likely much deeper than we originally expected and could extend far beyond 1.0366 support. Though, in case of further decline, we'd continue to look for loss of momentum and reversal signal as USD/CHF approaches next 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. On the upside, break of 1.0883 resistance will be the an important signal that USD/CHF has finally reversed and further break of 1.1021 resistance will confirm.


Economic Indicators Update

23:50JPYBSI Manufacturing index Q/Q Q315.5-11.4-13.2 
23:50JPYTertiary Industry Index M/M Jul0.60%0.60%0.10%0.20%
03:30JPYBoJ Interest Rate Decision0.10%0.10%0.10% 
08:30GBPRetail Sales M/M Aug0.00%0.20%0.40% 
08:30GBPRetail Sales Y/Y Aug2.10%2.70%3.30%2.90%
09:00EUREurozone Trade Balance (EUR) Jul6.8B1.2B1.0B 
10:00GBPU.K. CBI Industrial Orders Sep-48-49-54 
11:00CADCPI M/M Aug0.00%0.20%-0.30% 
11:00CADCPI Y/Y Aug-0.80%-0.70%-0.90% 
11:00CADBoC CPI Core M/M Aug0.10%0.10%0.00% 
11:00CADBoC CPI Core Y/Y Aug1.60%1.60%1.80% 
12:00CHFSNB Interest Rate Decision0.25%0.25%0.25% 
12:30CADLeading Indicators M/M Aug1.10%0.50%0.40%0.60%
12:30USDHousing Starts Aug598K595K581K589K
12:30USDBuilding Permits Aug579K580K560K564K
12:30USDInitial Jobless Claims (SEP 12)545K558K550K 
14:00USDPhiladelphia Fed. Survey Sep 7.84.2 
14:30USDNatural Gas Storage 74B69B