Action, not words, required to take pressure off the EUR

An element of doubt came back into the mind of market participants Monday as (in particular, German) officials began to raise the possibility that the much vaunted ‘grand plan’ (which the rhetoric and inference by eurozone leaders commentary has been since the initial formulation by Merkel and Sarkozy on the 9^th October) may not be the all-encompassing solution to the woes of the eurozone.
German Government spokesman Seibert stated “Dreams of a swift Euro solution won’t materialise”. In conjunction with the German Finance Minister’s statement that the “upcoming EU summit will not present [a] final solution for [the] eurozone debt crisis.”  Both comments added to the weigh of an already seemingly faltering EUR.
Broader risk assets also struggled yesterday as concerns filtered through into the banking sector, despite the significantly better than expected Q3 earnings figures from Citigroup. With little in the way of top tier data this week, headlines will continue to dominate sentiment. A clear example of this was seen yesterday when a Der Spiegel online article suggested that “top German economists are warning that France’s AAA rating could be in danger should additional measures become necessary to prop up indebted eurozone members of to save ailing banks.” This is not a new concept and, indeed, it is one which I have discussed on this page a number of times. But the timing of the story into a market already feeling vulnerable top bad news exacerbated the impact.
This morning the spread between French and German 10 year yields has hit another new record at 100bps and despite Finance Minister Baroin’s protestations that France will do “everything” to maintain its debt ratings, we have reached a pinnacle. We have reached the point at which the rousing, determined words of officials are no longer enough; a point where action is needed.  Schaeuble’s words yesterday, that seem to have undone all the calming work of the G20, could well see the EUR decline back to the lows, seen before the irrationally exuberant, Merkozy-inspired rally, over the next week.
In China overnight data came in better than broad expectations as Industrial Production and Retail Sales data picked up again in September after a decline in August.  Fixed Asset investment was broadly stable yet GDP for Q3 slowed to 9.1% (its slowest pace since 2009). Whilst GDP growth is the envy of the developed world it is widely believed that the structure of the Chinese Economy requires it to maintain growth above 8% to maintain stable unemployment. The current easing of growth saw interest rate swaps fall as, in addition to a marked slowdown in money supply and an easing in inflation, the market has begun to price in a halt to monetary tightening in order to support growth.
In the UK today we get CPI data for September, where the market is expecting a print close to the 5%, up from 4.5% in August. In the eurozone we await the ZEW economic sentiment index but as I suggested yesterday the current market is not driven by the data but predominantly by the politics and that will continue until we get a resolution in the eurozone.

For the rest of the week I would anticipate that the EUR, in particular, but broad risk assets (including the AUD) will underperform, and after the capitulative deleveraging rally of last week, the support on the downside is likely more fragile than before. I still favour EURGBP throughout this week, but risk off sentiment is likely to pick up as we approach the weekend.

Greece Reportedly Fails to Meet Targets, Sends Stocks Plummeting

A sea of red in the stock markets this morning after reports Greece once again failed to live up to its financial targets reporting a budget deficit of 8.5 percent against 7.5 percent targeted. Data-wise we have a bunch of PMI Manufacturing releases today with the US ISM Manufacturing high on the agenda. The week culminates with Nonfarm Payrolls on Friday and before that, on Thursday, Trichet will preside over his last ECB monthly rate meeting and press conference.

Greece fails to meet targets: It should come as a surprise to no-one and yet markets are tanking on the news that Greece has failed - again - to live up to its financial targets. While we should not let Greece off the hook entirely, we have stated repeatedly that the current framework is not workable. You cannot go the austerity route and reduce debts totalling 1.5 times your GDP without a severe recession, or shall we say depression. Instead, Greece (while bringing its government spending under control, of course) should be allowed to default and start afresh. But that will not happen as long as the European banking sector have not been sufficiently shielded from such actions. The current plan is a bank bailout, not a bailout of Greece, and causes suffering because the Eurozone leaders will not allow their banks, the lenders - those who made the bad investments - take the hit. It is capitalism without losers and it does not work, they are just as much part of a functioning market economy as are winners.

ISM Manufacturing to keep expanding... just: the national PMI Manufacturing for US is expected to show a slight increase in manufacturing in September with a reading of 50.3. Unlike several of the regional surveys the ISM Manufacturing Index held up surprisingly well in August with a 50.6 print. Nevertheless several regional surveys have continued to show declines in September (though smaller than those in August) and the New Orders component of the August ISM Manufacturing report was below 50 for the second month in a row. As we have noted before though the secular decline in manufacturing in the US implies that GDP will not necessarily decline just because ISM Manufacturing is below 50.

12 Giant U.S. Banks Vulnerable to Disaster!

Martin D. Weiss Ph.D.

Imagine this scenario …

The largest economy in the world is on the brink of a financial meltdown that could make the debt debacle of 2008 seem small by comparison.

Its giant banks are buried in bad loans and vulnerable to failure.

Its central government is paralyzed.

Chaos looms.

A Desperate Meeting

One weekend, in a last-ditch attempt to avoid disaster, top finance officials — representing 117 countries and six billion souls — come together and meet.

The officials engage in intense — sometimes frantic — debate. They explore every possible solution known to modern man, plus some that are still not known.

But they’re stumped. They come up with no new ideas.

That’s when the highest finance official of the world’s second-largest economy speaks.

He can barely mask his frustration — and fear — as he calls for massive, unprecedented steps to stem a domino-like series of defaults.

He cites words such as “cascading default, bank runs, and catastrophic risk.” And he bluntly tells the group that time is running out!

But when the meeting adjourns, nothing has been done; no decisions have been made. Instead, the finance officials fly home to the far corners of the globe. They go home to their families. And secretly, they pray the financial collapse does not destroy modern society as we know it.

Unbelievable? Then Consider This …

This was not a fictional scenario. It actually happened EXACTLY as I just described — THIS past weekend!

The economy on the brink of financial meltdown is the European Union. With a GDP nearly $2 trillion larger than the GDP of the United States, it is clearly the biggest economy in the world.

The giant European banks buried in bad loans include France’s Crédit Agricole and Société Générale. With $3.6 trillion in assets between them, they are the largest in the world.

And the high finance official who issued the doomsday warning is none other than U.S. Treasury Secretary Timothy Geithner.

Speaking before the delegates to the IMF/World Bank meeting in Washington, D.C., this past Saturday, his warnings were shocking. So they merit repeating:

→ Cascading default

→ Bank runs

→ Catastrophic risk

→ Running out of time!

Why was he so blunt? What does he fear that average citizens are just beginning to comprehend?

Is it the recent panic in the global markets — investors dumping sovereign bonds, banks recoiling from interbank lending, global money markets freezing up?

Is it the utter fragility of the U.S. economy, still struggling to recover from its own debt nightmare?

Or is it the chronic vulnerability of America’s largest banks, still loaded with bad mortgages, still taking massive risks with derivatives, and still directly vulnerable to Europe’s debt disaster?

The answer: All of the above! But of greatest concern is …

The Fragility of America’s Largest Banks

Many investors seemed shocked when Moody’s downgraded Bank of America’s long-term debt from A2 to Baa1 last week.

But even with the downgrade, we believe Moody’s is being overly generous to Bank of America. The bank has …

• $421.7 billion tied up in mortgages — more than any other bank on the planet!

• $52.5 trillion in high-risk derivatives — more than 36 times larger than its total assets and nearly 341 times bigger than its risk-based capital!

• Massive exposure to the possibility that some of its trading partners in the U.S., Europe, or elsewhere might default — to the tune of 182% of its capital, according to the Comptroller of the Currency.

And it’s not alone! Other major U.S. banks are in a similar predicament.

Candidates for Disaster

It’s because of these kinds of dangers that, one month ago, I warned Bank of America was a candidate for bankruptcy.

And it’s also because of these dangers that I’m publishing here our latest list of the nation’s weakest large banks, based the latest second-quarter data recently released by the FDIC.

Bank of America merits a Weiss Rating of D (weak). But it’s clearly not the only one. Also getting a D grade are two other giants — JPMorgan Chase and Wells Fargo.

Nor is this weakness restricted to the nation’s largest banks. Major regional institutions — SunTrust Bank, Regions Bank, Compass Bank, Huntington National Bank, and others — are also vulnerable.

All told, 2,553 U.S. banks and thrifts now get a Weiss Rating of D+ (weak) or lower, implying widespread vulnerability to the consequences of sovereign debt defaults in Europe and to a double-dip recession in the U.S.

How Could This Impact You?

In too many ways!

First, if you own bank stocks, you’re bound to lose a lot of money. Their shares are already plunging, and the experience of 2008-2009 tells us they could fall a lot more.

Second, banks and other financial institutions are the heartbeat of the entire economy. If they go down, so does business.

Third, if you have money in a weak bank, it could be in jeopardy. Yes, the U.S. government may come to the rescue. But because of scarce government resources and new, stricter bailout laws, this time around, any bailouts are bound to be more painful — to the bank, its shareholders, AND its creditors.

My recommendation:

1. Get your money to safety. If you must use a bank, do most of your business with those meriting a Weiss Rating of B+ or higher.

2. Never allow your deposits to exceed the FDIC protection limit.

3. For added safety and liquidity, seriously consider moving a big chunk of your cash from bank deposits and checking accounts to

• 3-month Treasury bills (which you can buy through your broker or directly from the Treasury) or …

• A money market fund that invests exclusively in short-term Treasuries.

Yes, I recognize that Uncle Sam’s finances are also shaky — a factor that could impact the price of medium- and long-term Treasuries. But short-term Treasuries are still safe. For cash you must keep away from market declines, they remain the best option.

4.With the right investments, the more bank stocks plunge, the more money you can make. And if a bank fails, the profit potential is enormous. But that’s just one way to use this great crisis as a great wealth builder. For details, see our latest video before it’s too late.

Good luck and God bless!

Martin D. Weiss Ph.D.

Dr. Weiss founded Weiss Research in 1971 and has dedicated the past 40 years to helping millions of average investors find truly safe havens and investments. He is president of Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. And he is the chairman of the Sound Dollar Committee, originally founded by his father in 1959 to help President Dwight D. Eisenhower balance the federal budget.

Daily Report: Euro Soft after Italy Downgrade, Greece Talk Continues

Euro remains generally weak after S&P downgraded Italy's credit rating. Also there are rumors that a major China bank has stopped foreign exchange swaps with several European banks in response to recent downgrades. Though, there was some relief as Greece said the country is close to getting the next tranche of bailout funds after a conference call with the international lenders. Dollar is steady on risk aversion and as FOMC will start its two days meeting today. Yen is also firm on news that the Japanese government is going to unveil some measures to cushion the image of its strength. Australia dollar stabilizes a bit as RBA minutes signals that the bank is in no hurry to cut rates.

S&P's cut the credit rating of Italy to A from A+, with a negative outlook, amid concern that deteriorating growth and a 'fragile' government would make the country unable to reduce its deficits. S&P's currently forecasts Italy's GDP to grow +0.7% this year, down from previous estimate of +1.3%. According to the agency, 'the reduced pace of Italy's economic activity to date will make the government's revised fiscal targets difficult to achieve'. Moreover, the 'fragile governing coalition and policy differences within parliament will continue to limit the government's ability to respond decisively to domestic and external macroeconomic challenges'.

There rumors that Bank of China, a major market-maker in China, stopped forwards and swaps trading with some European banks. Those banks include Societe Generale, Credit Agricole and BNP Paribas and recent downgrade by Moody's was cited as one of the major reasons. The bank declined to comment so far. It's believed that another China bank has followed and stopped trading yuan interest rates swaps with European banks too.

Greece Finance Minister Venizelos said that "substantive" discussion was held with EU and IMF officials on securing the EUR 8b installment of the first bailout. While the troika stressed the country should speed up activities in trimming spending and raising taxes, . Bob Traa, the IMF's resident representative in Greece, stated that 'impressive fiscal consolidation has happened' in Greece. The discussion will follow with another conference call today.

The RBA minutes of its September 6 meeting showed that bank is still confident that the boom engulfing the mining sector will continue to support the economy and gave little hints of rate cuts in near term. The minutes noted that "the international outlook had become significantly more clouded since the previous board meeting." But, "members considered that the current setting of monetary policy left the board well placed to respond to evolving global and domestic economic conditions."

It's reported that Japan is going to unveil a string of measures to cushion the impact of yen strength on domestic economy. The measures would likely include subsidies for companies to establish facilities in Japan. Also there will be measures for job creation and support to finances of SMEs. Economy Minister Furukawa said Japan needs to "establish a strong economic structure that won’t be affected by movements in currency markets, whether it’s a strengthening or a weakening in the yen."

The Fed will begin its FOMC meeting today. It's widely expected policymakers will announce something called 'operation twist' -increasing the average maturity of securities holdings by swapping holdings of lower maturities Treasuries with longer ones, after the 2-day meeting. Compared with outright bond purchases (QE3), one advantage of operation twist is that the size of the Fed's balance sheet would remain unchanged and is less unlikely to invoke inflation.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 104.01; (P) 104.75; (R1) 105.55; 

Intraday bias in EUR/JPY remains on the downside with focus on 103.88 support. Break there will confirm resumption of whole fall from 123.31 and should target medium term projection level at 103.42 first. On the upside, above 105.27 minor resistance will turn bias neutral and extend the consolidation pattern from 103.88. Nevertheless, even in case of another recovery, we'd continue to expect upside to be limited by 108.01 support turned resistance and bring fall resumption eventually.

In the bigger picture, the break of 105.42 support indicates that whole down trend from 169.96 has resumed. As noted before, the up trend in weekly MACD is broken and EUR/JPY is possibly building up downside momentum again. Next target will be 61.8% projection of 139.21 to 105.42 from 123.31 at 102.42. And sustained break there will pave the way to 100% projection at 89.52, which is close to 88.96 all time low. On the upside, break of 123.31 resistance is needed to signal trend reversal or we'll stay bearish. 

EUR/CHF  Daily Outlook

EUR/CHF spikes higher to 1.2213 today on rumor that SNB could raise the floor from 1.2 to 1.22, or even 1.25 tomorrow. The break of 1.2190 resistance argue that rise from 1.0061 might be resuming. But we'd prefer to see sustained trading above 1.22 level to confirm. In that case, EUR/CHF should head towards 1.2399 support turned resistance. Meanwhile, if SNB disappoints tomorrow, EUR/CHF could dropped back to prior range but again, SNB has made it clear about their intention to keep a floor at 1.2 and any decline attempt should be contained by this level.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
1:30	AUD	RBA Minutes
5:45	CHF	SECO Economic Forecasts Sep
6:00	EUR	German PPI M/M Aug	-0.30%	0.10%	0.70%
6:00	EUR	German PPI Y/Y Aug	5.50%	5.80%	5.80%
6:00	CHF	Trade Balance (CHF) Aug	0.81B	1.97B	2.83B
9:00	EUR	German ZEW Survey (Economic Sentiment) Sep		-45	-37.6
9:00	EUR	German ZEW Survey (Current Situation) Sep		40	53.5
9:00	EUR	Eurozone ZEW Survey (Economic Sentiment) Sep		-42.3	-40
12:30	CAD	Leading Indicators M/M Aug		0.20%	0.20%
12:30	CAD	Wholesale Sales M/M Jul		0.30%	0.20%
12:30	USD	Housing Starts Aug		590K	604K
12:30	USD	Building Permits Aug		590K	597K

Italy Downgraded as Troika Call Proves Fruitless

Not only did the Troika conference call yesterday not result in any concrete initiatives, but not long afterwards S&P, the ratings agency, went ahead and downgraded Italy in line with what it had earlier indicated was likely to occur. The calendar does have a few interesting numbers, but the Eurozone's struggles will be the agenda today before we gear up for the FOMC tomorrow.

Italy downgraded: One of the three big rating companies, S&P, went ahead and lowered Italy's sovereign debt rating by one notch to A from A+ previously and also slapped a negative outlook on the sovereign. The move surprised the markets with the EURUSD giving back all of the hardfought gains yesterday evening, but S&P actually had warned that such a move might take place stating in July that there is a "one-in-three likelihood that the ratings could be lowered within the next" two years. The rating agency expects Italy's economic activity wlil grow 0.7 percent annually over the coming three years which seems very low only until you consider that 1) Italy's GDP has only grown 0.2 percent annually from 2001 to 2010 and 2) that the country faces adverse effects from its coming austerity programme, which will further inhibit growth... Not exactly the perfect starting point of an attempt to lower the debt-to-GDP ratio of 119 percent and public deficit-to-GDP of 4.6 percent (December 2010 numbers).

Greece-Troika conference call proves fruitless: Despite the insistence of Greek Finance Minister Venizelos that the conference was "productive" the end result was weak by any standards with an agreement to schedule another conference call today in which further talks about the data will take place. The announcement afterwards said that a deal is close by, only to be followed up by the statement that some work is still needed to quantify measures. With the markets pricing in a near perfect probability of default let us see how long the charade will continue before the inevitable happens and Greece defaults, in an orderly or inorderly manner.

Building permits to decline in the U.S.: Yesterday's weak NAHB Housing Market Index printing 14 in September down from 15 last month did nothing to change the dismal outlook for the U.S. housing market. Today's Housing Starts and Building Permits report is expected to show declines in both to 590,000. The latter is part of the Conference Board's Leading Indicators Index.

(Note the disruptions in permits in 2010 caused by the First Time Homebuyer Tax Credit programme)

FOMC meeting commences today: The expanded two-day FOMC meeting commences today at 13:00 GMT with the (unchanged) rate decision tomorrow at 18:15. Will the committee announce QE3, Operation Twist or a third monetary policy tool? We will have much more on this in tomorrow's piece.

Daily Report: Risk Rally Continues Cautiously as Manufacturing Data in Spotlight Today

Risk rally extend mildly today but investors are generally cautious ahead of some important manufacturing data today. Appetite for risks is also dampened mildly by slightly weaker than expected China Manufacturing PMI as well as the surprised rate cut from Brazilian central bank. Euro and sterling are mildly softer as dragged down by rebound in Swiss Franc in EUR/CHF and GBP/CHF. Also, commodity currencies are also losing some upside momentum against the greenback.

Manufacturing data will be a key focus today. China PMI recovered from 29 month low of 50.7 to 50.9 in August but was slightly below expectation of 51. Eurozone manufacturing PMI finalized release will be released in European session today and is expected to be unrevised at 49.7 UK manufacturing PMI is expected to rise slightly to 49.5. Swiss SVME PMI is expected to dropped to 51.2 in August. US ISM manufacturing is expected to dropped to 48.5 in August. If inline with expectation, all, Eurozone, UK and US manufacturing PMI will be below 50, which suggests mild contraction ahead and will raise of risk that the global economy is entering back into recession. Other data to note include Australia retail sales, which rose slightly more than expected by 0.5% mom in July. Swiss Q2 GDP, retail sales, US jobless claims, non-farm productivity and construction spending will also be featured.

Swiss Franc remains firm as markets believe SNB won't intervene for the time being. Switzerland's Economy Minister Johann Schneider-Ammann said yesterday that the country have to "keep living with the strong franc for some time. It must be a combination of measures that will lead us into the future." Meanwhile, the Swiss government also pledged to use CHF 870m for an economic stimulus package to lessen the impact of the strength in Swiss Franc, aiming at supporting tourism, and exports. Technically, USD/CHF, EUR/CHF and GBP/CHF seem to have made short term tops earlier this week and are likely to pare back some of the strong intervention inspired gains. Nevertheless we'd be cautious in particular when EUR/CHF dips back below 1.1 level. It's still believed that SNB is determined to defend parity in EUR/CHF.

While risk appetite remains firm so far, we'd like to point out that stocks should be facing strong resistance in near term and investors would start to be cautious at current level and would likely weight for September's FOMC meeting for Fed to announce new stimulus. 55 days EMA in DOW at 11771 and 11862 resistance should hold in near term at least and traders will use every reason for profit taking, including possibility of poor ISM today and NFP tomorrow. 

EUR/CHF Daily Outlook

Daily Pivots: (S1) 1.1452; (P) 1.1651; (R1) 1.1778; 

Considering bearish divergence condition in 4 hours MACD, EUR/CHF might have made a short term top at 1.1971. Intraday bias is cautiously on the downside for the moment and sustained break 4 hours 55 EMA (now at1.1555) should bring deeper pull back to 1.1163 support and below. On the upside, though, above 1.1971 will extend the strong rebound from 1.0061 towards 1.2399 medium term support turned resistance next.

In the bigger picture, the strength of the rebound from 1.0061 argues it's a medium term bottom and EUR/CHF has turned into a phase of medium term consolidation. Sustained trading above 55 days EMA should bring stronger rise back to 1.2399/3243 resistance zone but strong resistance should be seen there to bring reversal. On the downside, decisive break of parity is needed to confirm down trend resumption. Otherwise, we'll now stay neutral in the cross and expect some more consolidations above there. 

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
22:45	NZD	Terms of Trade Index Q/Q Q2	2.30%	0.60%	0.90%	0.80%
1:00	CNY	PMI Manufacturing Aug	50.9	51	50.7
1:30	AUD	Retail Sales M/M Jul	0.50%	0.30%	-0.10%
5:45	CHF	GDP Q/Q Q2		0.40%	0.30%
6:00	EUR	German GDP Q/Q Q2 F		0.10%	0.10%
7:15	CHF	Retail Sales (Real) Y/Y Jul		4.60%	7.40%
7:30	CHF	SVME-PMI Aug		51.2	53.5
8:00	EUR	Eurozone PMI Manufacturing Aug F		49.7	49.7
8:30	GBP	PMI Manufacturing Aug		49.5	49.1
12:30	USD	Initial Jobless Claims		409K	417K
12:30	USD	Unit Labor Costs Q2 F		2.30%	2.20%
12:30	USD	Non-Farm Productivity Q2 F		-0.50%	-0.30%
14:00	USD	Construction Spending M/M Jul		0.10%	0.20%
14:00	USD	ISM Manufacturing Aug		48.5	50.9
14:00	USD	ISM Prices Paid Aug		55	59
14:30	USD	Natural Gas Storage		61B	73B

Daily Report: Dollar Retreats from Highs as Traders Await Bernanke

Although the greenback rallied across the board yesterday as the Federal Reserve looked less likely to announce QE3, the greenback failed to extend yesterday's gain and retreated quite sharply versus most major currencies. In the past 2-3 trading days, the greenback started to rebound as more and more traders changed their view and bet on Fed Chairman Ben Bernanke may not signal addition bond-buying in today's Jackson Hole Symposium, USD/JPY and USD/CHF surged to as high as 77.70 and 0.7989 respectively whilst EUR/USD and GBP/USD slipped to 1.4328 and 1.6260. Dollar retreated against the Japanese yen from a 2-week high of 77.70 (as indicated in our previous update that decent offers remain at 77.90-00). Market has been and is still yen long, with traders couldn't push the yen much higher (this week's high is 76.47) due to persistent bids from semi-official names and intervention fears, dealers are forced to cover their short ahead of today's key event. Having said that, exporters are still determined to defend the level of 78's with heavy offers still seen from 77.80 up to 78.00 and further out at 78.30-50 (large), however, they are unlikely to sell dollar aggressive in their usual month end transactions as they would prefer to wait for the Bernanke's speech (due at 14:00GMT). Current retreat is threatening stops from short-term speculators placed at 76.80 but bids from them are still noted at 77.10 and sizeable stops remain at 76.40 with more buying interest seen around 76.50-60. The much anticipated resignation of Japanese Prime Minister Kan had little impact on the currency market and new leader of the ruling DPJ party will be selected on Monday, with former Foreign Minister Seiji Maehara, being the top-pick. However, the economic minister Yosano said that the government will also release a list of suggestions for the new administration on how to deal with the strong yen, so yen traders shall closely keep an eye on the development next Monday.

After tumbling yesterday to 1.4328 on several bad news, including Greek yields around record high, renewed eurozone debt crisis concerns plus rumors of a German downgrade, euro staged a stronger rebound among other major currencies. The single currency bounced on sign of a possible solution to the differences on the collateral for emergency loans after a report from FT which indicated a so-called ‘euro working group' is examining a non-cash collateral arrangement. Through this arrangement Greece would put up either property or equity in state-owned enterprises as a guarantee against eurozone bailout loans. FT also reported that the euro area will discuss a new version of Finland's collateral agreement with Greece. In addition 3 rating agencies cleared the rumors of a German downgrade as CNBC reported that S&P's Moody's and Fitch all affirmed their ratings on German government debt. Moreover, news that Spanish government said an agreement had been reached with the main opposition People's Party over plans to preserve in its constitution limits on the public deficit, also supported euro. Last but not least, French President Nicolas Sarkozy said after meeting Chinese President Hu Jintao that Hu showed definitive confidence in the euro and the European economy also seen euro positive. As key of the day remains Fed's annual economic conference in Jackson Hole, euro is likely to stay within recent established range of 1.4259-1.4517 ahead of Bernanke's speech.

Meanwhile the Australian dollar benefited from upbeat comments from RBA Governor Glenn Stevens, in his semi-annual testimony before Parliament committee he said Australia was well positioned to tackle any further weakening of international conditions. He also stated that Australia's mining boom along with low unemployment and strong banking system will assist the country to go through global uncertainties.

On the data front, before the Jackson Hole at 14:00GMT, key for the day will be UK Q2 GDP (08:30GMT), US Q2 GDP (12:30GMT) and Aug University of Michigan Confidence survey at 13:55GMT.

USD/JPY Daily Outlook

Daily Pivots: (S1) 76.97; (P) 77.33; (R1) 77.82; 

USD/JPY's recovery extends further to as high as 77.68 so far before retreating mildly. With 76.46 minor support intact, intraday bias is mildly on the upside for further rise. But after all, we'll stay bearish as long as 80.23 and expect more downside ahead. Below 76.46 minor support will flip bias back to the downside. Break of 75.94 will confirm decline resumption and should target 100% projection of 81.46 to 76.28 from 80.23 at 75.05 next.

In the bigger picture, USD/JPY is still staying well inside the falling channel that started back in 2007 at 124.13. There is no indication of trend reversal yet even though medium term downside momentum is diminishing with bullish convergence condition in weekly MACD. Such down trend is still in favor to continue to 70 psychological level. In any case, break of 80.23 resistance is first needed to indicate completion of fall from 85.51. Secondly, break of 85.51 is needed to be the first signal of medium term reversal. Otherwise, we'll stay cautiously bearish in the pair.

Daily Report: Yen Shrugs off Moody's Downgrade and Rises as MOF's Measures Disappoints

The Japanese yen slipped initially early in the morning as Moody's downgraded Japan's sovereign rating for one notch to Aa3 with a stable outlook and on news MOF scheduled announcement at 2:30GMT. The rating agency blamed the Japanese government for large budget deficits and building up of debt since 2009 global recession, whilst unstable leadership hammered the effectiveness of the country's economic strategies. Moody's also indicated that Japan needs to achieve 3% of nominal GDP growth in order to get the nation's deficit problem in check, the plan of doubling the sales tax from 5% to 10% by 2015 may not be enough to solve the debt issue. However, the impact of the sovereign downgrade together with negative rating actions on most Japanese banks proved to be short-lived. Firstly, this was only a catch-up action with S&P's) and secondly, Moody's see current yen level is stressful to the Japanese economy but not dreadful. More importantly is the disappointment after the announcement of MOF Noda for new measures to dead with the yen strength. Japanese Ministry of Finance announced an emergency credit facility will be created at the amount of US$100 billion to assist Japanese firms to cope with the yen's strength. This facility will use dollar funds in the FX reserves to facilitate acquisition of foreign firms by Japanese firms. This emergency package is temporary and will last for one year. Nevertheless, as Noda did not mention anything about intervention and just talked about the government will strengthen its monitoring of the currency market for excessive speculative moves and has asked financial firms to report of their FX positions for the period to end of September, the Japanese yen rose again after the announcement. Still noted bids around 76.45/50 and further out at 76.00-10 with stops remain below 75.90 whilst on the upside, offers from exporters are lined up at 76.85-95 with some stops seen at 77.00 but sizeable stops only emerging above 77.25/30.

The greenback rebounded against other major currencies with EUR/USD slipped from day's high of 1.4442 to 1.4387, once again due to risk aversion as Asian equities are all in the red zone. Yesterday's comments from PBOC adviser Xia saying the FX reserve should be used to buy resources, energy and equities rather than euro debts, seemed still pressuring the euro. In addition, Finland Prime Minister told reporters that he would say yes if Finland could drop out of the Greek bailout plan. This also caused concerns over the effectiveness of the rescue package for eurozone debt crisis. Last in the line of negative comments on euro was former Fed chairman Alan Greenspan, who simply said that the euro is breaking down whilst U.S. is not yet in a double-dip territory. At the moment, bids are still noted at 1.4380-90 for protection of stops below 1.4370 and 1.4345/50 whilst offers from Japanese names (EUR/JPY) related are tipped at 1.4440-50 and further out at 1.4500-10 with stops placed above 1.4520 and 1.4550.

The Swissy extended yesterday's rebound on the back of active buying in EUR/CHF (jumped from yesterday's low of 1.1315 to today's high of 1.1460) and dollar's broad-based strength against European currencies. It seemed that recent actions by Swiss National Bank, including zero rates and intervening in the forward market did put a floor on the USD/CHF and EUR/CHF. More and more analysts are expecting the headline pair to retest last week's high of 0.8020 in the near term. We heard bids from model funds are located at 0.7880/85 whilst offers from European names remain at 0.7990-0.8000. With investors still hoping Fed Chairman Bernanke to announce QE3 on Friday in Jackson Hole speech, dollar's upside is likely to be limited.

Elsewhere, Asian names were seen selling aussie this morning partly due to the release of soft Conference board leading index (-0.8% vs previous -0.1%) and weaker-than-expected construction work done in Q2 (0.7% vs forecast of 1.0%). At the moment, offers are still noted from 1.0500 up to 1.0550, stops at 1.0470 were triggered but bids from real money accounts are still noted at 1.0450/55.

USD/JPY Daily Outlook

Daily Pivots: (S1) 76.43; (P) 76.68; (R1) 76.89; 

USD/JPY continues to stay inside tight range of 75.94/77.19 and intraday bias remains neutral. More consolidative trading would be seen and above 77.19 will bring another recovery. But we'll stay bearish as long as 80.23 and expect more downside ahead. Break of 75.94 will confirm decline resumption and should target 100% projection of 81.46 to 76.28 from 80.23 at 75.05 next.

In the bigger picture, USD/JPY is still staying well inside the falling channel that started back in 2007 at 124.13. There is no indication of trend reversal yet even though medium term downside momentum is diminishing with bullish convergence condition in weekly MACD. Such down trend is still in favor to continue to 70 psychological level. In any case, break of 80.23 resistance is first needed to indicate completion of fall from 85.51. Secondly, break of 85.51 is needed to be the first signal of medium term reversal. Otherwise, we'll stay cautiously bearish in the pair.

Daily Report: Euro Eases on Disappointment of Franco-German Summit, Focus Shifts to SNB Meeting

As indicated in our previous update that the meeting between French President Sarkozy and German Chancellor Merkel will not be able to provide any credible solution to the escalating debt crisis in the region and nothing solid will be agreed between the two counties, the summit did disappoint the markets. Euro was hurt by the lack of progress over a common Eurobond, the announcement stated that a joint euro bonds may be a longer term option. The two leaders also failed to address the underlying problem of debts in the individual countries and the banking issues. The single currency retreated from the day's high of 1.4473 after the joint conference as French and German leaders rejected the proposed Eurobond plan as well as an expansion of the 440 billion euro rescue fund (EFSF) to stop the region's debt crisis. Many analysts and economists suggest the only way to settle the financial instability in the eurozone especially with the peripheral countries would be for the eurozone to issue joint euro bonds. Euro slipped back below yesterday's low of 1.4355 this morning, however, decent demand continued to appear around mid 1.43 level and more bids from European names are reported at 1.4300.

Once again the Swiss franc was the biggest mover among other major currencies, after rebounding yesterday in New York session on rumors of SNB checking rates in forward market, Swissy edged higher again ahead of the meeting between Switzerland's government and SNB later today to discuss the franc. Traders are speculating the Swiss authorities may come up with some new measures to curb franc's strength. Swiss franc fell across the board, with USD/CHF and EUR/CHF breaking above the level 0.8000 and 1.1500 respectively. Although there has been talk that the SNB will set a temporary peg of the EUR/CHF for some time, rumors circulating that the SNB may set a more aggressive target for the EUR/CHF at a rate higher than previously rumored 1.10 level (rumors including 1.15, 1.20 and 1.25). Having said that, there are still traders and analysts are skeptical of a peg between euro and the Swiss franc, they believe measures like capital controls over money inflows and negative rates for offshore deposits are more likely scenario. If the Swiss authorities do disappoint the market, the Swiss franc may surge against both euro and dollar which may indirectly hurt the single currency as strength in EUR/CHF has been supporting the euro recently even with the soft GDP data in eurozone.

The British pound continued to move higher yesterday on higher-than-expected CPI and suggestions from BOE Governor King that UK inflation may reach 5%, sterling somehow benefited from retreat in euro and cable retested this month's high formed on 8 Aug at 1.6478. Cross-buying due to risk appetite on rebounding equities also seen supporting the sterling, however, cable started retreating since overnight trade in New York as traders booked profit ahead of the release of Bank of England MPC meeting minutes and UK employment data all scheduled at 08:30GMT. BOE minutes should be the key, analysts are expecting at least one of the hawks (Spencer Dale and Martin Weale) may deflect and voted for no change which make the votes count at 8-1, if a vote of 9-0 is released, this may put pressure on sterling.

Elsewhere, the release of better-than-expected Australian data, Q2 wage price index and June Wespac leading index lifted aussie and fund buying was seen this morning, pushing AUD/USD higher to session high of 1.0497 and mixture of stops and offers in the region of 1.0500-20 is in focus, next batch of stops is located at 1.0550.

Daily Report: Euro Retreats from 3-week High ahead of Eurozone GDP

The single currency retreated from 3-week high against the greenback as some traders booked profit on their long euro position ahead of the meeting between French President Sarkozy and German Chancellor Merkel. The meeting will be held in Paris and is scheduled to start at 1400 GMT, followed by a joint news conference at 1600 GMT. As indicated in our previous update that Eurobonds will not be discussed in the summit, investors bet the meeting will be very much non-event and only the two leaders may only talk about improving economic governance, so no specific measures will be announced to deal with the regional debt crisis contagion. If that is that case, then traders' focus will probably shift back to the release of several European economic data today, including German Q2 GDP (forecast at 0.5% vs previous 1.5%) at 06:00GMT and eurozone Q2 GDP (consensus at 0.3% against prior 0.8%). Both are preliminary data and the forecasts are weaker than previous readings, if the data (especially the eurozone GDP) do come in weaker than expected, concerns over debt crisis of peripheral countries plus Spain and Italy will be once again heightened. Basically traders are already betting there may be higher chance the number will be weak with previous manufacturing PMI all showed soft readings. Stops below 1.4400 were triggered and only light bids are reported at 1.4370 and 1.4350 with more stops seen below latter level and 1.4300.

The retreat in EUR/CHF was another reason on today's pullback in euro, after surging over 1300 points from the record low of 1.0075, the currency pair finally reached a temporary top at 1.1458 yesterday. Although EUR/CHF opened higher yesterday and rose by 2.2% on Sunday's newspaper report that the SNB was poised to set a target rate above 1.10 Swiss franc per euro, the pair retreated as traders found the level of 1.13-1.14 too attractive to buy Swiss franc. With more and more dealers not convince of an actual EUR/CHF peg plus persistent eurozone debt problem, sooner or later renewed safe-haven demand will emerge again. Current speculation is that the SNB may take action tomorrow (17 Aug) and if there is any disappointment caused by the Swiss authorities, the franc may once again surge across the board. It was quite obvious that the Swissy met heavy offers right ahead of the psychological 0.8000 level and bids at 0.7800 were absorbed this morning, next batch of buying interest is tipped at 0.7700 by UK name and offers from same party are also noted at 0.7850-60 and further out at 0.7900-10.

The British pound also slipped since overnight New York session as traders squared there long cable position ahead of some important UK data due out later today. The highlight of the day will be on July CPI with forecast centered at -0.1% m/m and 4.3% y/y, consensus for core CPI at 3.0%; UK RPI will also be released at 08:30GMT with economists expecting -0.2% m/m and 5.0% y/y. DCLG house price data will also be published at the same time but will have much less effect on sterling. Some traders already priced in a lower-than-expected CPI which may lead to a downward revision of BOE quarterly inflation report, hence put pressure on the British pound.

Elsewhere, the release of RBA's August meeting minutes dragged aussie down a bit, overall tone from the minutes was quite balance but it did not suggest any sign that the central bank was considering cutting rates in the near future. In wake of the ‘acute' uncertainty in global financial markets, committee members voted against a rate hike in the last meeting. The minutes also stated that subdued consumer spending and higher Australian dollar were seen dampening inflation, the central bank saw downside risks more pronounced and it was prudent to hold rates whilst assessing the economic growth. Nevertheless, no surprise was seen from the document but some traders interpreted as there is very much unlikely that RBA will raise rates.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 109.94; (P) 110.49; (R1) 111.49; 

Intraday bias in EUR/JPY remains neutral for the moment. While recovery from 108.01 might extend further, we'd continue to expect upside to be limited by 111.23 minor resistance and bring fall resumption. Below 109.62 minor support will flip bias back to the downside. Further break of 108.01 will extend the whole decline from 123.31 towards 105.42/106.28 support zone. On the upside, above 111.23 will bring stronger rebound. But after all, we'd stay cautiously bearish as long as 114.17 resistance holds and expect more downside ahead.

In the bigger picture, current development suggests that rebound from 105.42 medium term bottom was merely a correction and has completed at 123.31 already. Whole down trend from 2008 high of 169.96 was not finished yet and should extend beyond 105.42. Also, as weekly MACD will most likely break its trend line as the current fall from 123.31 extends, EUR/JPY is possibly regaining medium term downside momentum too. Break of 105.42 will target 61.8% projection of 139.21 to 105.42 from 123.31 at 102.42 first. Though, note that break of 123.31 resistance will in turn revive the case that the medium term trend has reversed and will turn focus back to 139.21 resistance instead. 

Daily Report: Swiss Franc and Japanese Yen Both Slip on Possible Actions by SNB and BOJ

Once again the Swiss franc took center stage and dropped against most major currencies, hitting a 2-week low against the greenback and euro this morning in Asia on persisting speculation that the Swiss National Bank would take further action to weaken the franc. Bet on a EUR/CHF peg intensified after a Swiss newspaper report over the weekend, 

SonntagsZeitung newspaper reported on Sunday that the SNB is likely to set a target rate for EUR/CHF in coming days (probably 17 Aug) above the 1.1000 level. EUR/CHF surged to as high as 1.1325 this morning on such report and USD/CHF also opened higher and rose well above last week's high to around 0.7990. SNB Chairman Philipp Hildebrand and the other policy makers are working closely to seek appropriate plan to stop further appreciation in Swiss franc, some measures had already been taken such as boosting liquidity in money market and cutting rates to zero. Swiss government and lawmakers have expressed their support for the central bank to take drastic measures to curb franc's ascent in order to protect the country's economy. Having said that, some traders considered the speculation of a EUR/CHF peg has been over exaggerated and the franc may rebound this week when traders start realizing such a peg may not materialize. In addition, with U.S. and eurozone still having their own economic problem, Swiss franc remains the major safe-haven target for investors, so if nothing happen on the rumor day of implementation on 17 Aug, the Swiss franc may rally later this week.

The Japanese yen also slipped on fear of possible intervention by Bank of Japan, the Ministry of Finance of Japan Yoshihiko Noda changed his tone and indicated that he is ready to intervene in currency market again. During a television show on NHK, Noda not only said he is closely watching the markets but he would also take decisive and bold action if it becomes necessary as an unstable situation is continuing. EUR/JPY bounced above 110.00 to as high as 110.27 and USD/JPY also marked an intra-day high of 77.10 on Noda's comment. The government echoed Noda's remark and according to a policy overview approved by the cabinet, the government considered the excessive FX moves will hurt economic and financial stability and pledged to take decisive steps when necessary. The government also wanted the BOJ to boost the nation's economy through appropriate flexible policy. However, the Japanese yen then rebounded after the release of stronger-than-expected Japanese economic data, Japan's Q2 GDP shrank at a rate of -0.3%, less than economists' forecast of -0.6%. Macro funds were seen buying USD/JPY since last Friday but offers from exporters in good size are still noted from 77.20 up to 77.40 with some stops seen at 77.30 and 77.50.

The single currency opened higher this morning on the back of rising EUR/CHF and EUR/JPY due to risk appetite as Asian stock markets rebounded following Friday's strength in European and U.S. equities. Stops above 1.4300 were triggered and traders are working on offers reported from 1.4320 up to 1.4350. The single currency may continue to be underpinned on speculation tomorrow's meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy may help easing concerns on French debt crisis contagion. The two leaders are expected to discuss improvement of European governance and expansion of EFSF's role and some traders hope them to come up with some measures to contain the eurozone debt crisis.

EUR/CHF Daily Outlook

Daily Pivots: (S1) 1.0809; (P) 1.0952; (R1) 1.1218; 

EUR/CHF jumps further to as high as 1.1366 so far today and momentum remains strong. It looks likely that 1.1404 support turned resistance will be taken out by the current rebound and that would raise the possibly of medium term reversal. In any case, intraday bias remains on the upside for the moment and break of 1.1404 will target 55 days EMA (now at 1.1635) next. On the downside, below 1.1047 minor support will turn bias neutral and bring retreat. But another rise will now remain in favor as long as 1.0685 minor support holds.

In the bigger picture, while 1.0061 is a short term bottom, there is no indication of trend reversal yet. Whole down trend from 1.6827 (2007 high) is still in progress. Medium term outlook will remain bearish as long as 1.1404 resistance holds and we'd expect an eventual break of parity. Nevertheless, note that a break of 1.1404 resistance will argue that 1.0061 could indeed be a medium term bottom and stronger rebound might then be seen back to 1.2399/3243 resistance zone. 

Weekly Review and Outlook: Risk Sentiments Stabilized for Now, More Consolidations Before Jackson Hole

Risk selloff intensified initially last week in response to S&P's downgrade of US rating and the hollow statement G7 regarding the current market turmoil. Though, sentiments "stabilized" as the week went on, after Fed pledged to keep rates low until mid-2013. The attempt to extend the spotlight of European debt crisis to France was unsuccessful and that's followed by banning of shorting financial stocks in France, Italy, Spain and Belgium. Also, Spanish and Italian yields dropped sharply after ECB buying. Major world equity indices recovered strongly from intra-week lows. However, we believe that the market sentiments were just "stabilized" rather than reversed. The European debt crisis won't go way that easily. And global economies, including US, UK and Eurozone are poised to slow down on austerity measures, dragging down other parts of the world. So, risk assets will remain vulnerable to further selloff even though more consolidations would likely be seen before Bernanke's Jackson Hole Speech on August 26.

The Fed delivered a much more dovish policy statement in August as the path of recovery has been 'considerably slower than expected'. As a prelude to additional easing, the central bank pledged for the first time that interest rates will stay at exceptionally low levels at least until mid-2013 and reinvestment of maturing proceeds will be maintained. Wall Street rebounded after the report as investors looked forward for additional stimulus in coming meetings. Meanwhile, markets will be eagerly waiting for Bernanke's speech in the Jackson Hole meeting. Bernanke announced QE2 at Jackson Hole last year and there are rumors that he will also announcement something that moves market this year. That might include additional bond purchases of over $1T, targeting at long term securities like 10 year and 30 year bonds to push funds back to risk assets. In addition, Fed might remove the interest payments given to excess bank reserves at the central bank. We'll wait and see what Bernanke finally delivers.

In the currency markets, the biggest shock was the reversal in Swiss Franc's strength after SNB official talked about temporary peg to Euro. SNB Vice Chairman Thomas Jordan was quoted saying "any temporary measures to influence the exchange rate are permissible under our mandate as long as these are consistent with long-term price stability," and that could include a temporary peg to Euro. SNB's move of cutting rates, adding liquidity to the markets are so far very ineffective. Meanwhile, SNB officials should be aware of the fact that outright intervention in the markets in 2009/10 caused substantial losses with little impact and almost triggered Chairman Philipp Hildebrand to step down. While we should still have a long distance from pegging Swiss Franc with Euro, the SNB might have strong determination to defend EUR/CHF from breaching parity. A wide range of tools could still be used and as Jordan hinted, that might include creating negative interest rate environment for non-resident Swiss Franc deposits. There is also call for tax on foreign deposits.

While the Swiss franc pulled back sharply, the Japanese yen was the strongest currency last week on safe haven flows. Though, we saw some hesitation to push the Japanese yen further lower towards the end of the week, partly due to recovery in stocks. Japan's Finance Minister Yoshihiko Noda declined to comment on the effectiveness of the unilateral intervention on August 4. But he warned that Japan would consider various options to curb yen's strength if excessive yen rises persist.

The BOE lowered its economic forecasts amid global economic turmoil. In the latest quarterly inflation report, policymakers stated that the biggest risk came from sovereign crisis in the Eurozone. Risks to growth are skewed to the downside as slowdown in growth may turn out to be more persistent than previously expected. The BOE retained the view that inflation will return to a little below target in the medium-term. The BOE left the Bank rate unchanged at 0.5% and the asset purchase program at 200B pound at the meeting last week. Yet, it reiterated the flexibility to add or remove stimulus measures when conditions warrant.

Technical Highlights

S&P 500 dived to as low as 1101.54 last week before drawing support from 38.2% retracement of 666.79 to 1370.58 at 1101.73 and recovered. A short term bottom is in place. However, note firstly that price actions from 1101.54 are so far corrective which suggests it's merely consolidations. Also, please be reminded that S&P 500 completed a medium term head and shoulder reversal pattern earlier (ls: 1344.07, h: 1370.58, rs: 1339.62). The trend line from 666.79 was also firmly broken. So, we'd believe that whole up trend from 666.79 was over. Hence, upside of the current consolidation should be limited by neck line resistance at around 1260 level and bring fall resumption. S&P 500 should eventually break through 1101.54 towards 1010.91 key support and below. 

Dollar index continued to engage in range trading around 55 days EMA last week. Near term outlook remains neutral. The dollar index might continue stay in range of 74/77 for a while but the current development is still favoring more downside. Break of 74.18 will likely send the index through 72.69 towards 70.70 record low.  

GBP/CHF basically followed other swiss crosses, diving to new record low of 1.1464 initially then rebounded strongly. A short term bottom is in place after brief break of long term target of 161.8% projection of 2.4965 to 1.5112 from 1.8113 at 1.2024. More rise would likely be seen initially this week. But at this point, we'd expect strong resistance from 1.3038 cluster resistance (38.2% retracement of 1.5691 to 1.1464 at 1.3079) to limit upside. We'd expect some sideway consolidation above 1.1464 before the long term down trend finally resumes to parity. 

Australian dollar has been extremely weak in the past two weeks, just as other commodity currencies. EUR/AUD's rebound from 1.2927 extended to as high as 1.4261 but failed 1.4341 resistance and retreated. AUD/USD is at a junction as it's just hold above a medium term retracement level. And Aussie's fate would very much depends on whether AUD/USD would have another deep fall and on whether EUR/AUD would take out 1.4341 resistance. Decisive break of 1.4341 will complete a double bottom reversal pattern (1.2926, 1.2927) and would signal completion of the down trend from 2.1127 and medium term reversal. But before that, we'll stay neutral in cross first.

The Week Ahead

Risk sentiments should remain stable this week and stocks, as well as commodity currencies might extend recovery. But upside potential should be relatively limited and markets would like like stay in range for a while. Dollar, Euro and Sterling would likely stay in range against each other, going nowhere though the pound is vulnerable to some weakness considering the even risks. Swiss France and Japanese yen might try to regain some strength towards the end of the week.

• Monday: Japan GDP; US Empire State Manufacturing, TIC capital flow, NAHB housing market index
• Tuesday: RBA minutes; German GDP, Eurozone GDP; UK CPI; US new residential construction, industrial production; New Zealand PPI
• Wednesday: UK employment, BoE minutes; Eurozone CPI; UK PPI
• Thursday: Japan trade balance; UK retail sales; US CPI, jobless claims, existing home sales, Philly Fed survey
• Friday: German PPI; UK public sector net borrowing; Canada CPI

USD/CHF Weekly Outlook

USD/CHF dived to new record low of 0.7065 last week but staged a strong rebound since then as the Swiss Franc pulled back sharply after SNB comments. At short term bottomed is formed at 0.7065 and we'd expect more consolidations above this level for a while. Further rebound is expected initially this week to 0.7801 resistance and above. Though, we'd expect upside to be limited below 0.8081 resistance and bring another fall to extend the consolidations. Below 0.7548 minor support will flip bias back to the downside for retesting 0.7065 first.

In the bigger picture, while the rebound from 0.7065 was strong, there is no indication of trend reversal yet. We'll stay bearish as long as 0.8275 support turned resistance holds. Current down trend from 1.1730 is still expected to extend through 0.7 psychological level. Though, that would come after some more consolidations above 0.7065 first. Meanwhile, sustained trading above 0.8275 will indicate that such fall from 1.1740 has finished and open up the possibility of rebound back to 0.9634 support turned resistance.

In the longer term picture, long term down trend from 2000 high of 1.8305 is still in progress. There are various interpretation of the price actions. But after all, USD/CHF should be resuming the set of impulsive fall from 1.8305 to 1.1288. The current down trend might now be targeting next projection level of 100% projection of 1.8305 to 1.1288 from 1.3283 at 0.6266.