Daily Report: Drastic Turn in Sentiments, Dollar Correction Completed

Market Overview | Written by ActionForex.com | Sep 19 08 07:40 GMT |

Market sentiments had a drastic 180 degrees turn after yesterday's coordinated central bank actions and then the US government's plan to consider a blanket bailout for banks. Treasury Paulson and Fed Bernanke met with Congressional leaders and proposed a new entity to be formed to take troubled assets off the balance sheets of American financial institutions. The SEC is also expected to propose a temporary ban on short-selling of some, or all stocks. DOW soared over 410pts in a late really in the US session and posted the biggest gain since 2003. Asian equity markets also open sharply higher and maintain strength throughout the session. Reactions in the forex market saw dollar generally higher across the board while the yen is pressured. The development so far is inline with the broad outlook in dollar. In particular, the rally in USD/CHF left the fall from 1.1416 in three wave structure which is inline with our view that the dollar's fall was just a correction in a larger up trend. Weakness in EUR/USD and GBP/USD today are supporting this view too. Having said that, we'd expect the greenback to maintain strength today and will likely test recent high against European currencies. The outlook in yen is still mixed as it's still early to declare that carry trade is back. While the rebounds in USD/JPY and AUD/JPY are impressive, EUR/JPY and GBP/JPY are still held by near term resistance. Traders are advised to avoid these crosses until the picture is cleared. USD/CHF Daily Outlook Daily Pivots: (S1) 1.0924; (P) 1.1017; (R1) 1.1134; More USD/CHF's correction from 1.1416 was contained at 1.0899, slightly above mentioned 1.0882 cluster support (38.2% retracement of 1.0010 to 1.1416 at 1.0879) as expected. Subsequent rebound pushed USD/CHF through 1.1111 minor resistance and then the inner falling channel, indicating that correction from 1.1416 has completed. Further break of 1.1248 resistance will confirm this case and bring retest of 1.1416 high first. Break will indicate recent up trend has resumed for next medium term target of 1.1596. On the downside, while some pull back might be seen, the above view remains unchanged as long as 1.0882 cluster support holds. In the bigger picture, medium term outlook remains bullish with USD/CHF staying well above 55 weeks EMA and weekly MACD staying positive. The whole rise from 0.9634 is still expected to extend further to test next two cluster resistance, 1.1596 (161.8% projection of 0.9634 to 1.0623 from 1.0010 at 1.1610) and 1.1878 (61.8% retracement of 1.3283 to 0.9634 at 1.1889). On the downside, sustained trading below 1.0632 support will raise the odds that whole medium term rebound from 0.9634 has completed and will put focus back to trend line support at 1.0218.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
22:45	NZD	New Zealand Current account (nzd) Q2	-3.19B	-3.50B	-2.16B	-2.11B
5:00	JPY	Japan Leading indicators Jul F	91.4	91.6	91.6
6:00	EUR	Germany PPI M/M Aug	-0.60%	-0.40%	2.00%
6:00	EUR	Germany PPI Y/Y Aug	8.10%	8.40%	8.90%