Daily Report & Outlook : Forex Currency Pairs

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9171; (P) 0.9210; (R1) 0.9270; 

USD/CHF's break of 0.9261 resistance suggests that recent rally has resumed and intraday bias is back on the upside for 161.8% projection of 0.7065 to 0.8246 from 0.7710 at 0.9621 next. On the downside, below 0.9146 minor support will turn bias neutral and bring consolidations. But after all, break of 0.8917 is needed to confirm short term topping. Otherwise, outlook will remain bullish in near term.

In the bigger picture, medium term down trend from 1.1730 is already completed at 1.7065. But there is no indication of long term reversal yet. Rebound from 0.7065 is treated as part of a medium term consolidation pattern. Such rebound would possibly extend to 0.9916/1.1730 resistance zone. But strong resistance should be seen there and bring reversal. On the downside, break of 0.7710 is needed to indicate completion of the rebound from 0.7065. Otherwise, we'll stay near term bullish in the pair for the moment.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.3276; (P) 1.3329 (R1) 1.3399; 

EUR/USD's recovery from 1.3145 is still in progress and might extend further to 4 hours 55EMA (now at 1.3434) and above. But still, note that break of 1.3689 resistance is needed to signal short term bottoming. Otherwise, outlook will remain bearish. Below 1.3145 will target 161.8% projection of 1.4939 to 1.3969 from 1.4548 at 1.2979, which is close to 1.3 psychological level.

In the bigger picture, current development indicates that medium term rise from 1.1875 has completed with three waves up to 1.4939 already. That also suggests that it's merely part of the consolidation pattern that started back in 2008 at 1.6039. Further decline would now be seen to 1.2873 support first and break will target 1.1875 and below. On the upside, above 1.4548, resistance is needed to confirm completion of the fall from 1.4939 or we'll stay bearish in EUR/USD.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8595; (P) 0.8622; (R1) 0.8656; 

EUR/GBP's recovery from 0.8529 might extend further as long as 0.8584 minor support holds. But upside should be limited below 0.8795 resistance and bring an eventual downside breakout. Below 0.8584 will turn bias back to the downside. Further break of 0.8529 support will confirm resumption of recent fall from 0.9083 and target 100% projection of 0.8884 to 0.8529 from 0.8795 at 0.8440 next.

In the bigger picture, price actions from 0.9799 (2008) should be unfolding as a consolidation pattern in the long term up trend. The first leg is completed with three waves down to 0.8067. Second leg should also be finished at 0.9083. Fall from 0.9083 is treated as the third leg and should now target 0.8067 first and possibly further to 61.8% projection of 0.9799 to 0.8067 from 0.9083 at 0.8013 (which is closes to 0.8 psychological level). Nevertheless, we'd expect strong support from 0.7693/8186 support zone to contain downside to finish off the consolidation. On the upside, break of 0.8884 resistance is needed to invalidate this view or we'll stay bearish now.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.9542; (P) 0.9603; (R1) 0.9719;

AUD/USD's rebound from 0.9387 extends further to as high as 0.9726 so far today The break of 0.9672 minor resistance affirms the case that a short term bottom is at least formed after drawing support from 0.9404 key medium term level, on bullish convergence condition in 4 hours MACD. Intraday bias remains on the upside and further rise should be seen to 0.9984 resistance next. Break will target upper channel resistance (now at 1.0478). On the downside, below 0.9621 minor support will turn bias neutral. But break of 0.9387 support is needed to confirm fall resumption. Otherwise, we'll now favor more rebound ahead in near term.

In the bigger picture, focus remains on 0.9404 key support level. As long as this support holds, price actions from 1.1079 is treated as a correction, or part of a consolidation pattern to the up trend from 0.6008 only. And, in such case, AUD/USD should still made another high above 1.1079 before forming an important top. However, sustained break of 0.9404 will indicate that rise from 0.6008 is already finished and would possibly bring deeper fall towards 61.8% retracement of 0.6006 to 1.1079 at 0.7945.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.0344; (P) 1.0458; (R1) 1.0519;  

USD/CAD's fall from 1.0656 extends further to as low as 1.0394 so far. The break of 1.0431 minor resistance indicates that a short term top is formed on bearish divergence condition in 4 hours MACD after missing 161.8% projection of 0.9406 to 1.0009 from 0.9725 at 1.0701. Intraday bias is mildly on the downside and deeper decline would be seen to 38.2% retracement of 0.9725 to 1.0656 at 1.0300 and possibly below. But we'd expect strong support from 50% retracement at 1.0191 to contain downside and bring rebound. More consolidations would be seen below 1.0656 would be seen before rally from 0.9406 resumes towards 1.0803 medium term fibonacci level.

In the bigger picture, sustained trading above 55 weeks EMA affirms the case that whole down trend from 2009 high of 1.3063 has finished at 0.9406 on bullish convergence condition in weekly. Current rally from 0.9406 should now target 1.0851 resistance (38.2% retracement of 1.3063 to 0.9406 at 1.0803). Break there will extend the rebound to 61.8% retracement 1.1666 and above. On the downside, break of 1.0009 support is needed indicate completion of the rally from 0.9406. Otherwise, we'll stay bullish in USD/CAD. 

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.5406; (P) 1.5449; (R1) 1.5505;  

GBP/USD is staying in tight range above 1.5340 temporary low and intraday bias remains neutral. Consolidation from 1.5327 might still be in progress and stronger recovery cannot be ruled out. But even in that case, upside should be limited by 38.2% retracement of 1.6618 to 1.5327 at 1.5820 and bring fall resumption eventually. On the downside,, decisive break of 1.5327 will confirm resumption of recent fall from 1.6746 and should target 161.8% projection of 1.6746 to 1.5780 from 1.6618 at 1.5055 next

In the bigger picture, rise from 1.4229, which is treated as the third leg of consolidation from 1.3503 (2008 low) should be finished at 1.6746 after GBP/USD completed a head and shoulder top reversal pattern (ls: 1.6298, h: 1.6746, rs: 1.6618). Fall from 1.6746 could be the fourth leg of the consolidation pattern from 1.3503 (2008 low) or resuming long term down trend from 2.1161 (2007 high). In either case, retest of 1.4229 resistance should be seen. Break of 1.4229 will bolster the down trend resumption case and would possibly push GBP/USD through 1.3503 low. On the upside, break of 1.6618 resistance is needed to invalidate this view. Or we'll now stay cautiously bearish in GBP/USD.

Daily Report: Euro Off as Greece Decision Delayed Again, Aussie Down as RBA Turned Dovish

Euro extends recent decline broadly after the six-hours EU finance ministers meeting in Luxemburg yielded few concrete conclusion on the Greece and the measures to contain European debt crisis. Belgian Finance Minister Reynders noted that they're informed by Greece that funds will have to be made available in "mid-November" and EU will now wait for the report from troika to decide on release the next tranche of bailout fund. Nonetheless, EU President Juncker later assured that there's "no one advocating a default for Greece" and it will be avoided. Focus will turn to next meeting on October 13 and it's still doubtful whether the decision will be delayed once again. Meanwhile, the finance ministers are also reviewing the size of private sector involvement in the second bailout for Greece.

Regarding the discussion on expanding and leveraging the EFSF, it appears that the possibility is low as finance ministers are divided on the issue. Bank of France Governor Noyer said he supported leveraging the fund. However, it's unrealistic to expect an increase in the beefed-up rescue fund and it's unlikely for leverage. Juncker said the ceiling of the rescue fund shouldn't be raised and the ECB should not be involving in any future leveraging of the fund. German Finance Minister Schaeuble said that expansion talk was premature as 3 countries have yet to even ratify the EFSF plan agreed in July.

Japanese Finance minister Azumi urged Europe to "make the process of rescuing Greece more transparent to the markets" in order to "halt the extreme strength in the yen and weakness in the euro". after EUR/JPY drops to decade low and is heading towards 100 psychological level. There are increasing speculation that Japan will target the next intervention move towards EUR/JPY even though such speculation is premature for the moment.

Fed debuted that operation twist program yesterday by buying USD 2.5b in treasuries maturing in 25-30 years. 30 year yield dived to close to 2.761% overnight, hitting the lowest level in almost three years. 10 year yield also dropped to 1.785%. Bernanke will appear before the Join Economic Committee today on economic outlook and would likely face questions on how effective the operation twist will be.

Aussie extends recent fall against dollar and breaches 0.95 level today on risk aversion and as RBA turned dovish. As expected, the RBA left the cash rate unchanged at 4.75%. Yet the post-meeting statement came in more dovish than the previous one. Governor Glenn Stevens downplayed impacts of recent deterioration US and European outlook. Nevertheless, it now appears more likely that the central bank will consider a rate cut in coming months if inflation is under control. We retain our view that a rate cut will be carried out in the fourth quarter. 

AUD/JPY extends recent down trend this week as reaches as low as 72.46 so far. Near term outlook remains bearish as long as 76.65 resistance holds and we'd expect further fall to 71.84 support next. Current development is also inline with the view that whole medium term rise from 2008 low of 55.09 is already completed at 90.01 and deeper fall should be seen to 61.8% retracement of 55.09 to 90.01 at 68.42 and below. 

EUR/JPY Daily Outlook

Daily Pivots: (S1) 100.19; (P) 101.70; (R1) 102.47; 

EUR/JPY's fall is still in progress and reaches as low as 100.74 so far today. Intraday bias remains on the downside for 100 psychological level. Break will target 200% projection of 123.31 to 113.41 from 117.74 at 97.94 next. On the upside, above 102.22 minor resistance will turn bias neutral and bring consolidations. But break of 104.92 resistance is needed to signal short term bottoming. Otherwise, outlook will remain bearish.

In the bigger picture, whole down trend from 2008 high of 169.96 is still in progress and is building up downside momentum again. Sustained trading below 100 psychological level should pave the way to 100% projection of 139.21 to 105.42 from 123.31 at 89.52, which is close to 88.96 all time low. On the upside, break of 111.93 resistance is needed to be the first signal of medium term reversal. Otherwise, we'll stay bearish. 

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.3098; (P) 1.3240 (R1) 1.3313; 

EUR/USD drops further to as low as 1.3163 today so far and intraday bias remains on the downside for 161.8% projection of 1.4939 to 1.3969 from 1.4548 at 1.2979, which is close to 1.3 psychological level. On the upside, above 1.3381 minor resistance will turn bias neutral and bring consolidations. But break of 1.3689 resistance is needed to signal short term bottoming. Otherwise, outlook will remain bearish.

In the bigger picture, current development indicates that medium term rise from 1.1875 has completed with three waves up to 1.4939 already. That also suggests that it's merely part of the consolidation pattern that started back in 2008 at 1.6039. Further decline would now be seen to 1.2873 support first and break will target 1.1875 and below. On the upside, above 1.4548, resistance is needed to confirm completion of the fall from 1.4939 or we'll stay bearish in EUR/USD.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9122; (P) 0.9170; (R1) 0.9262; 

USD/CHF's break of 0.9182 resistance confirms resumption of recent rally from 0.7065. Intraday bias remains on the upside and further rally should be seen to 161.8% projection of 0.7065 to 0.8246 from 0.7710 at 0.9621 next. On the downside, break of 0.8917 support is needed to signal short term topping. Otherwise, outlook will remain bullish in near term.

In the bigger picture, medium term down trend from 1.1730 is already completed at 1.7065. But there is no indication of long term reversal yet. Rebound from 0.7065 is treated as part of a medium term consolidation pattern. Such rebound would possibly extend to 0.9916/1.1730 resistance zone. But strong resistance should be seen there and bring reversal. On the downside, break of 0.7710 is needed to indicate completion of the rebound from 0.7065. Otherwise, we'll stay near term bullish in the pair for the moment.

 Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	Monetary Base Y/Y Sep	16.70%	16.30%	15.90%
0:30	AUD	Trade Balance (AUD) Aug	3.10B	2.14B	1.83B	1.82B
0:30	AUD	Building Approvals M/M Aug	11.40%	1.00%	1.00%	1.80%
1:30	JPY	Labor Cash Earnings Y/Y Aug	-0.60%	0.70%	-0.10%	-0.20%
3:30	AUD	RBA Rate Decision	4.75%	4.75%	4.75%
8:30	GBP	PMI Construction Sep		51.6	52.6
9:00	EUR	Eurozone PPI M/M Aug		-0.20%	0.50%
9:00	EUR	Eurozone PPI Y/Y Aug		5.80%	6.10%
14:00	USD	Fed Chairman Bernanke Testifies
14:00	USD	Factory Orders Aug		-0.10%	2.40%

USDCHF - Cautiously Bullish above 0.8949.

A third negative daily performance in succession was posted by USDCHF Tuesday as this week's reaction to last week's gains continued. The net downside is not extensive and the lows were not maintained with some demand returning ahead of 0.8900. The resulting bounce leaves immediate signals for sentiment mildly positive and so although gains are currently assessed as temporary our call is Cautiously Bullish above 0.8949.

The immediate objective is 0.9017, yesterday's open, with a move beyond that point targeting yesterday's 0.9059 high or even 0.9082.

Selling through 0.8949, is the risk to this call as it signals that buying pressure is weaker than currently assessed. The market should then decline to 0.8925, yesterday's low, then 0.8876, the open from Sep 21st.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9219; (P) 0.9276; (R1) 0.9320; 

Intraday bias in USD/CHF remains on the downside with 0.9351 minor resistance intact. Current decline should now be target 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 0.9351 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.