Despite staging a brief rebound from record low against the Swiss franc earlier today, the greenback ran into heavy selling pressure and tumbled again to another record low on renewed worries that rating agencies may downgrade U.S. top credit rating even the bill is passed in Congress. Whilst the vote is counting in congress for the bill to pass for a US$2.4 trillion deficit cut in 10 years plus raising the debt ceiling, investors are starting to doubt that this bill may not be enough to avoid a possible downgrade of the nation's AAA credit rating. Fresh round of safe-haven flows and thin market conditions (U.S. investment banks and real money accounts were seen buying Swiss franc) pushed the Swiss franc sharply higher to another historical peak against the greenback and option barriers at 0.7800 and 0.7780 are in focus with next triggers seen at 0.7720 and 0.7700. On the upside, offers are lined up from 0.7850 up to 0.7900 with more selling interest tipped at 0.7950 (stops above 0.7960).
The greenback also tumbled against the Japanese yen to another over 4-month low under Friday's low of 76.70 on concerns that rating agencies might find the US$ 2.4 trillion cut in deficit could not turn U.S. weak fiscal position. Traders took last week's soft U.S. GDP data as excuse to sell the greenback and stops below 76.50 are within range but some bids from semi-official names are still noted above this level. Once these stops are triggered, next target will obviously be the record low formed in March at 76.25 with more stops expected below this level and 76.00 option barrier. On the upside, offers are reported from 77.20 up to 77.50 and also at 77.70-80 with stops only seen above 78.10-20.
Meanwhile, the single currency turned south from intra-day high of 1.4454 on selling in EUR/CHF and option players were seen selling euro, weaker-than-expected manufacturing purchasing managers' indices from eurozone countries also put pressure on euro, German manufacturing PMI came in at 52.0 versus forecast of 52.1, bids from 1.4400 and 1.4340-50 were absorbed, mixture of bids and stops at 1.4300 is now in focus. On the upside, offers from various parties (including U.S. investment houses and real money accounts) are now seen from 1.4350 up to 1.4400. Some traders suggested that surprise announcement in Spain last Friday to call for an early general election raised concerns over political uncertainty in the eurozone.
As suggested in our previous update that if the UK manufacturing PMI data came in below 50 level, it will hurt sterling, the British pound did tumble in London session as the data dropped to 49.1, well below consensus of 51.0 and previous number of 51.4 (revised), despite staging a brief bounce, cable met renewed selling below today's high of 1.6477 and dropped sharply from there in a free fall speed to below 1.6300. Stops below 1.6250-60 are now in focus, mixture of bids and stops is tipped further out at 1.6190-00. On the upside, selling interest from Eastern European and Middle East names are reported from 1.6350 up to 1.6400 with stops starting to build above latter level.
USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 0.7794; (P) 0.7912; (R1) 0.7975; More...
USD/CHF's decline resumes after brief recovery and reaches new record low of 0.7815 in early US session. Intraday bias is back on the downside for medium term projection level at 0.7797. Break will target 161.8% projection of 0.8519 to 0.8081 from 0.8277 at 0.7568 in near term. On the upside, above 0.7952 minor resistance will turn bias neutral again. But after all, recovery should be limited by 0.8081 support turned resistance and bring down trend resumption.
In the bigger picture, long term down trend from 1.1730 is still in progress and there is no signal of reversal yet. Such decline is expected to extend to 100% projection of 1.1730 to 0.9462 from 1.0065 at at 0.7797. Break will pave the way to 138.2% projection at 0.6931 which is close to 0.7 psychological level. On the upside, break of 0.519 resistance is needed to be the first sign of medium term bottoming or we'll stay bearish in the pair.
Economic Indicators Update
|02:30||CNY||HSBC Manufacturing PMI||49.3||50.1|
|07:55||EUR||German PMI Manufacturing||52||52.1||52.1|
|08:00||EUR||Eurozone PMI Manufacturing||50.4||50.4||50.4|
|09:00||EUR||Eurozone Unemployment Rate||9.90%||9.90%||9.90%|
|14:00||USD||Construction Spending M/M||0.20%||-0.10%||-0.60%|
|14:00||USD||ISM Prices Paid||59||64||68|