EUR/CHF made another record low below 1.2 psychological level earlier today but recovers mildly after SNB kept rates unchanged as widely expected. The three month Libor range was held at 0-0.75% with the lower part of the target range at 0.25%. SNB noted that the Swiss economy continues to benefit from "robust" global demand in spite of Franc's strength. GDP growth projection was maintained at 2% in 2011. Nevertheless, the bank also noted "downside risks predominate", including Eurozone peripheral debt programs, fiscal consolidations and surge in commodity prices. Though, appreciation of Franc was highlighted as the main threat to Swiss economy. There is practically no change in EUR/CHF's bearish outlook after SNB's release and we'd expect the cross to continue to make new record lows ahead.
Elsewhere, risk aversion remains the main theme today and dollar index managed to jump to as high as 75.88 so far. Asian equities were broadly lower on the lack of resolution to the Greece situation, following the -178 pts drop in DOW. European major indices also open broadly lower. Greece Prime Minister George Papandreou will reshuffle his Cabinet for a confidence vote today and the new triggered concern that the negotiation for the second bailout will be further prolonged. Meanwhile, a main focus will be on the meeting between German Chancellor Merkel and French President Sarkozy tomorrow on whether the two major Eurozone leaders would agree on the way to involve private investors in Greece's bailout.
Crude oil's break of 94.63 support overnight suggest resumption of fall from 114.83 and should pave the way towards 90 psychological level. Indeed, weakness is seen in commodities in general. CRB commodity index's recovery was limited at 352.05 and failed to sustain above 55 days EMA. Yesterday's sharp fall suggests that correction from 370.70 is resuming too for 38.2% retracement of 247.25 to 370.70 at 323.54. Such development should be dollar supportive.
As noted before dollar index could have made a medium term bottom at 72.69 on bullish convergence condition in daily MACD. Break of 76.36 resistance will affirm this case and target 100% projection of 72.69 to 76.36 from 73.50 at 77.17 first. Further break there will add more credence to the case that rise from 72.69 is impulsive and should target 38.2% retracement of 88.70 to 72.69 at 78.80.
On the data front, New Zealand consumer confidence improved to 112 in Q2. Business NZ manufacturing index rose to 54.7 in May. Swiss industrial production dropped sharply by -9.2% qoq in Q1. UK retail sales and Eurozone CPI final will be the mail feature in European session ahead. From US, focus will be on initial jobless claims, housing starts and building permits, Philly Fed survey. In particular, the Empire state manufacturing index was terribly weak yesterday and disappointing figure in the Philly Fed survey would possibly trigger more risk selloff.
USD/JPY Daily Outlook
USD/JPY's recovery from 79.69 is currently viewed as the third led of consolidation from 79.56 and could still extend further higher. But even in that case, we'd expect upside to be limited by 50% retracement of 85.51 to 79.56 at 82.53 and bring resumption of fall from 85.51. Below 79.69 will suggest that such decline is likely resuming for 75.98 low finally.
In the bigger picture, note that USD/JPY's rebound from 76.40 was held by medium term long term falling trend line as well as the 55 weeks EMA. Thus, down trend from 124.13 could still be in progress. Current fall from 85.51 might now extend through 76.40 for a new record low. In any case, break of 85.51 is needed to revive the case that USD/JPY's down trend has finished. Otherwise, we'll stay cautiously bearish in the pair.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:00 | NZD | Westpac NZ Consumer Confidence Q2 | 112 | 97.9 | ||
| 22:30 | NZD | Business NZ Manufacturing Index May | 54.7 | 51.5 | 52 | |
| 2:00 | CNY | Conference Board Leading Index Apr | 0.20% | 1.00% | 0.90% | |
| 7:15 | CHF | Industrial Production Q/Q Q1 | -9.20% | -7.80% | 7.40% | 7.70% |
| 7:15 | CHF | Industrial Production Y/Y Q1 | 5.00% | 5.60% | 6.10% | |
| 7:30 | CHF | SNB Rate Decision | 0.25% | 0.25% | 0.25% | |
| 8:30 | GBP | Retail Sales M/M May | -0.60% | 1.20% | ||
| 8:30 | GBP | Retail Sales Y/Y May | 1.50% | 2.80% | ||
| 8:30 | GBP | Retail Sales w/Auto Fuel M/M May | -0.60% | 1.10% | ||
| 8:30 | GBP | Retail Sales w/Auto Fuel Y/Y May | 1.50% | 2.80% | ||
| 9:00 | EUR | Eurozone CPI M/M May | 0.00% | 0.60% | ||
| 9:00 | EUR | Eurozone CPI Y/Y May | 2.70% | 2.70% | ||
| 9:00 | EUR | Eurozone CPI - Core Y/Y May | 1.60% | 1.60% | ||
| 9:00 | EUR | Eurozone Employment Q/Q Q1 | 0.20% | 0.20% | ||
| 12:30 | CAD | International Securities Transactions (CAD) Apr | 5.45B | 6.34B | ||
| 12:30 | USD | Initial Jobless Claims | 420K | 427K | ||
| 12:30 | USD | Building Permits May | 552K | 563K | ||
| 12:30 | USD | Housing Starts May | 545K | 523K | ||
| 12:30 | USD | Current Account Balance Q1 | -$130.0B | -$113.3B | ||
| 14:00 | USD | Philly Fed Survey Jun | 7 | 3.9 | ||
| 14:30 | USD | Natural Gas Storage | 65B | 80B |
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