Mid-Day Report: Dollar Firm after Mixed Data

Dollar stays firm against Yen and Aussie after mixed US data. USD/JPY reaching six year high of 108.95 and is on course for 110 handle. Meanwhile, AUD/USD staying soft below 0.9 handle. On the other hand, the greenback is struggling to extend gain against European majors. In particular GBP/USD recovers as the Scottish independence referendum started today and the would likely be result next morning. Economic data released from US saw initial jobless claims dropped to 280k in the weekended September 13. Housing starts dropped to 0.96m in August while building permits dropped to 1.00m. Canada international securities transactions rose to CAD 5.3b in July. Elsewhere, CBI trends total orders -4 in September, retail sales rose 0.4% mom in August. Swiss trade surplus narrowed to CHF 1.39b in August. New Zealand GDP rose more than expected by 0.7% qoq in Q2. Japan trade deficit narrowed to JPY -0.92T in August.

The SNB intensified the stance that it would use all possible means to combat deflation, as the central bank revised lower the growth and inflation outlook in the September meeting. Policymakers announced to defend the 1.2 floor of EURCHF, noting that ‘given a worsening of the environment, the key remains the minimum exchange rate’. In the meantime, the central bank also left the target range for the three-month Libor unchanged at 0.0 – 0.25%.However, EURCHF weakened after the statement as the market had anticipated that the central bank would accelerate easing measures and there had been rumors that the SNB would adopt negative rates. More in SNB Strengthened Stance To Interfere EURCHF If Inflation Deteriorates Further.

Dollar Surged yesterday and market reactions suggested that investors viewed the September FOMC meeting as a hawkish one although the Fed retained the language that ‘it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends’. Meanwhile, the Fed continued QE tapering and announced a further USD 10b reduction in asset purchases. On the accompanying statement, it is stated clearly that the asset purchase program would end at its next meeting. The Fed’s latest set of economic projection showed somehow downward revision on the growth outlook. The mildly lower growth outlook did not tamper the expectations of an earlier rate hike schedule with the members raising their median estimate for the Fed funds rate, as the dot plot shows, to 1.375% at the end of 2015 from 1.125% forecasted in June. More in FOMC Left ‘Considerable Time’ Language But Generally Viewed As More Hawkish.

Daily Pivots: (S1) 107.49; (P) 107.94; (R1) 108.78; More…

USD/JPY reaches as high as 108.95 so far today and intraday bias remains on the upside. Current rally should now extend to 100% projection of 96.56 to 105.43 from 101.08 at 109.95 next. Break there will pave the way to long term fibonacci level at 111.62. On the downside, break of 106.80 support is needed to indicate short term topping. Otherwise, outlook will stay bullish in case of retreat.

In the bigger picture, whole medium term up trend from 75.56 is still in progress. Current upside accelerating indicates that the pair is building upside momentum again. Current rally would likely extend through 50% retracement of 147.68 to 75.56 at 111.62 to 61.8% retracement at 120.13 and above. On the downside, break of 101.08 is needed to signal medium term reversal, or outlook will stay bullish.

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
22:45
NZD
GDP Q/Q Q2
0.70%
0.60%
1.00%

23:50
JPY
Trade Balance (JPY) Aug
-0.92T
-0.99T
-1.02T

06:00
CHF
Trade Balance (CHF) Aug
1.39B
2.56B
3.98B
3.90B
07:30
CHF
SNB Rate Decision
0.00%
0.00%
0.00%

08:30
GBP
Retail Sales M/M Aug
0.40%
0.40%
0.10%
0.00%
10:00
GBP
CBI Trends Total Orders Sep
-4
9
11

12:30
CAD
International Securities Transactions (CAD) Jul
5.30B
2.47B
-1.07B
-1.08B
12:30
USD
Initial Jobless Claims (SEP 13)
280K
312K
315K
316K
12:30
USD
Housing Starts Aug
0.96M
1.04M
1.09M
1.12M
12:30
USD
Building Permits Aug
1.00M
1.04M
1.06M
1.06M
14:00
USD
Philly Fed Survey Sep

22.1
28

14:30
USD
Natural Gas Storage

92B

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