The greenback finally rebounded today from record low of 0.7610 on broad-based retreat in Swiss franc after Swiss National Bank (SNB) unexpectedly cut interest rates, the SNB narrowed down its target range for the 3-month Libor from 0.00%-0.75% to 0.0%-0.25%. The central bank also expand its sight deposits to 80 billion Swiss francs from 30 billion francs, SNB also gave comments that the Swiss franc is 'massively overvalued'. The central bank's moves are giving the market a clear message that the central bank wants to see a weaker Swiss franc and decisive strong measures will be taken. EUR/CHF rebounded quickly from record low of 1.0795 to as high as 1.1149 and Swissy also jumped to 0.7788 before retreating, some offers from Swiss corporates are reported at 0.7800 and further out at 0.7850 with stops building up above 0.7880 and 0.7900.

The single currency slipped briefly to a almost 2-week low of 1.4143 in European morning before staging a strong rebound form there in part due to the release of better-than-expected eurozone economic data, eurozone July service PMI and June retail sales both came in higher than economists' forecast, with service PMI at 51.6 (vs forecast of 51.4) and retail sales at 0.9% (vs consensus of 0.5%). Euro shot up over 200 points from 1.4143 to as high as 1.4345 after the release, rebound in Italian and Spanish debt on speculation that an official name could start buying the bond in next few days also seen pushing the single currency higher. We heard offers from 1.4380 up to 1.4400 where an option is located but bids from Asian sovereign names are reported at 1.4240-50 and further out at 1.4200 but good size buying interest remains at 1.4140-50 with stops building below there.

The British pound also rallied in tandem with euro in London morning after the release of better-than-expected UK July service PMI, which came in at a 4-month high of 55.4 against analysts' consensus of 53.2, stops at 1.6330 and 1.6355/60 were triggered and cable surged to as high as 1.6409 before easing as U.S. ADP employment data showed the private sector hired more people than expected (market forecast was 100K). At the moment, order books became quite light as traders await tomorrow Bank of England rate decision to see if there is any sign of enlarging QE.

On the other hand, traders neglected the release of better-than-expected ADP employment data and continued to sell the greenback against the Japanese yen after Moody's Investors Services said U.S. is still at risk of being downgraded from its top credit rating. However, some dealers expect the downside would be limited as they expect the Bank of Japan will use monetary easing to stop recent strength in yen. Offers are noted at 77.40-50 and further out at 77.80 with stops tipped above 77.90 and 78.10-20 whilst bids are likely to emerge above support at 76.25-29 with sizeable stops placed below 76.20, 76.00 and 75.90. Expect further narrow range trading ahead of Bank of Japan rate decision tomorrow.

EUR/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0694; (P) 1.0950; (R1) 1.1079; More

EUR/CHF's strong recovery indicates that a temporary low is formed at 1.0974. Intraday bias is turned neutral for the moment for some sideway consolidations. But upside of recovery is expected to be limited below 1.1404 support turned resistance and bring fall resumption. Below 1.0794 will target 161.8% projection of 1.2344 to 1.1404 from 1.1891 at 1.0372 next.

In the bigger picture, whole down trend from 1.6827 (2007 high) is still in progress and in any case, medium term outlook will remain bearish as long as 1.2399 support turned resistance holds. Next target will be 161.8% projection of 1.8234 to 1.4391 from 1.6827 at 1.0609. Nevertheless, break of 1.2399 will be the first sign of bottoming and should bring stronger rebound to 1.3243 resistance for confirmation.




Economic Indicators Update

23:01GBPBRC Shop Price Index Y/Y Jul2.80%2.90%
01:30AUDTrade Balance (AUD) Jun2.05B2.23B2.33B2.70B
01:30AUDRetail Sales M/M Jul-0.10%0.40%-0.60%
07:55EURGerman PMI Services Jul F52.952.952.9
08:00EUREurozone PMI Services Jul F51.651.451.4
08:30GBPPMI Services Jul55.453.253.9
09:00EUREurozone Retail Sales M/M Jun0.90%0.50%-1.00%-1.30%
11:30USDChallenger Job Cuts Y/Y Jul59.40%5.30%
12:15USDADP Employment Change Jul114K100K157K145K
14:00USDISM Non-Manufacutring Composite Jul52.753.853.3
14:00USDFactory Orders Jun-0.80%-0.50%0.80%
14:30USDCrude Oil Inventories1.3M2.3M