Daily Report: Dollar Firm on Revived Bailout Plan Hope

Market Overview | Written by ActionForex.com | Oct 01 08 06:30 GMT |

After a strong rally, dollar remains firm in Asia on news that a sweetened $700b bailout plan will pass Senate votes today and also pass House vote successfully on Thursday. US Senate is set to vote on the modified $700 rescue plan on Wednesday. Changes include raising FDIC insurance from $100k to $250k, which will get more democrat votes, and a two-year extension of tax breaks that will save individuals and corporations about $149 billion over the next decade, which will get more republican votes. It's believed that the arrangement itself and the changes will be enough to take 12 more votes from the House on Thursday to pass the bill. House surprised the markets by voting against rescue plan by 228 to 205 on Monday. In addition, the greenback is supported by concern that the credit crisis in the US is spreading quicker than expected to Europe. Four lenders were bailed out by governments in Europe this week. IMF chief Dominique Strauss-Kahn said that Europe needs to develop a version of their bailout plan for their own financial crisis. Technically speaking, the strong rally in dollar index confirms that correction from 80.38 has completed at 75.89. Also, it reaffirms that whole rise from 71.31 is still in progress and should target 50% retracement of 92.63 to 71.31 at 81.97 next. Quarterly Tankan survey showed confidence among Japanese businesses continued to deteriorate in Q3. Large manufacturing index dropped sharply from 5 to -3, hitting the first negative result in more than five years. Large manufacturing index dropped from 10 to 1. Capex growth slowed from 2.4% to 1.7%, much worse than expectation of 2.5%. Germany retail sales rose 3.1% mom, -3.0% in Aug. In the coming European session, main focus will be on UK manufacturing PMI which is expected to drop further t from 45.9 to 45 in Sep and Eurozone unemployment rate which is expected to be unchanged at 7.3% in Aug. Swiss SVME PMI and trade balance, Eurozone final Manufacturing PMI will be released. In US, ADP employment report is expected to show -55k contraction. ISM manufacturing index is expected to be steady at 50 in Sep. AUD/USD Daily Outlook Daily Pivots: (S1) 0.7825; (P) 0.7960; (R1) 0.8059; More AUD/USD dropped further to 0.7864 before recovering mildly. At this point, intraday bias remains on the downside and further decline is expected to retest 0.7802 low. Break will confirm that near term down trend from 0.9849 has resumed for next medium term support of 0.7675 first. On the upside, above 0.8097 will turn intraday outlook neutral first but further fall is still expected as long as 0.8275 minor resistance holds. However, above 0.8275 will argue that consolidation from 0.7802 is still in progress and should bring stronger rise to above 0.8519 before completion. In the bigger picture, a medium term top is at least in place at 0.9849 with bearish divergence condition in weekly MACD and RSI. While some corrective rebound might be seen in short term, the impulsive nature of the decline from 0.9849 indicates that such fall should extend further after completing the consolidation. Sustained trading below 0.7802 will pave the way for deeper medium term decline to 61.8% retracement of 0.4773 to 0.9849 at 0.6712. On the upside, firm break of mentioned 0.8812 cluster resistance is needed before considering that the fall from 0.9849 has completely finished.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	Japan Tankan capex Q3	1.70%	2.50%	2.40%
23:50	JPY	Japan Tankan big manufacturing Q3	-3	-2	5
6:00	EUR	Germany Retail sales M/M Aug	3.10%	0.50%	-1.00%
6:00	EUR	Germany Retail sales Y/Y Aug	-3.00%	-2.20%	0.60%
7:30	CHF	Swiss SVME PMI Sep		50.9	52.5
7:55	EUR	Germany Manufacturing PMI Sep F		48.1	49.7
8:00	EUR	Eurozone Manufacturing PMI Sep F		45.3	47.6
8:30	CHF	Swiss Trade balance (chf) Aug		N/A	-1.64B
8:30	GBP	U.K. Manufacturing PMI Sep		45	45.9
9:00	EUR	Eurozone Unemployment rate Aug		7.30%	7.30%
12:15	USD	U.S. ADP employment Sep		-55.0K	-33K
14:00	USD	U.S. Construction spending Aug		-0.50%	-0.60%
14:00	USD	U.S. ISM manufacturing Sep		50	49.9
14:35	USD	Crude Oil Inventories		1.8M	-1.5M