Financial Advisor

Daily Report: USD/CHF at Record Low on Safe Haven Flow, Heading to 0.9

Swiss Franc soars to record high against dollar as worry on the middle east situation intensified. Crude oil breached 100 level overnight on the fact that the developments in Libya has caused production cut by 25%. Markets are seeing no ends in sight in the turmoil in Middle East and North Africa and are deeply concerned that the current developments will spread to other countries in the region, in particular other large oil production countries like Saudi Arabia. Safe have currency Swiss Franc is strong across the board, followed by Japanese yen. However, dollar once again lagged as it remains soft against Euro and Sterling on rate speculation over ECB and BoE. USD/CHF breached key support level of 0.9300 and should be heading towards 0.9 psychological level now.
Rate expectations and oil prices are two factors that's holding dollar back in the current risk aversion market conditions. Some major global central banks seem ready to tighten monetary policy earlier than expected including ECB, BoE and BoC. However, the current development is not expected to push up Fed's timetable as it's tied with the dual mandate of price stability and full employment with unemployment rate standing at 9.0%. On the other hand, apart from the disruption in oil production in Libya, investors worried that the unrest, if spread to other OPEC countries, will affect production in the world's largest producer to Saudi Arabia. It's possible that the unrest would spill over into the country's eastern provinces, neighboring to Bahrain. Saudi's eastern provinces are home to oil production and refining. It is also where the Ghawar oil field, the world's largest oilfield and the Ras Tanura oil port are located.
Among the major currencies, New Zealand dollar remains the weakest one. Markets are raising the bet for a rate cut from RBNZ at its March 10 meeting. Pricing in markets jumped from 28% before the Christchurch earthquake, up to over 50% currently. On the other hand, Aussie is relatively much firmer as reports showed that business investment jumped to a record in Q4 of 2011. Also RBA Governor Glenn Stevens said mining investment may increase by as much as 2 percent of gross domestic product in the next few years.
On the data front, Australia conference board leading indicator rose 0.7% in December, German Q4 GDP final, Eurozone confidence indicators, Swiss employment level and UK CBI report sales will be released in European session. From US jobless claims, durable goods, new home sales and house price index will be featured.
NZD/JPY's strong break of 61.69 support confirmed our view that fall from 65.34 has resumed. Also, the three wave structure of the rebound from 58.38 indicates that it's merely a correction in the larger decline and has completed at 65.34 already. We'll stay bearish in the cross for the momentum and expect at least a test on 58.38 support ahead. Note that it's possibly the whole decline from 2010 high of 69.32 is resuming but we'll watch whether current fall would accelerate first.

Daily Pivots: (S1) 0.9294; (P) 0.9342; (R1) 0.9378;
USD/CHF drops to as low as 0.9273 so far today and the break of 0.9300 support confirms resumption of the larger down trend. Intraday bias remains on the downside and current fall should now be targeting 100% projection of 1.0065 to 0.9300 from 0.9774 at 0.9009, which coincides with major medium term target. On the upside, above 0.9391 minor resistance will turn bias neutral and bring recovery. But upside should be limited by 4 hours 55 EMA and bring another fall.
In the bigger picture, the break of 0.9300 support confirms resumption of the long term decline from 2010 high of 1.1729. Next target will be 61.8% projection of 1.8305 to 1.1288 from 1.3283 at 0.8946, which is close to 0.9 psychological level. On the upside, break of 0.9774 resistance is needed to be the first signal of medium term bottoming. Otherwise, outlook will stay bearish even in case of strong rebound.

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