Mid-Day Report: Dollar Strengthens on Talk of Second Stimulus Package

Market Overview | Written by ActionForex.com | Oct 20 08 14:38 GMT |

Dollar strengthens in early US session after Fed Chairman Bernanke said that additional fiscal stimulus package should be considered to help improve "access to credits" by consumers, homebuyers, businesses and other borrowers given the "extraordinarily uncertain" economic outlook. In his testimony to House Budget Committee, Bernanke said that such actions might be "particularly effective" at promoting "economic growth and job creation." Dollar index soars to as high as 82.92. USD/CHF is back pressing 1.1486 high and could be resuming recent up trend. The Japanese yen is also mildly higher against most major currencies except the dollar. On the data front, US leading indicators unexpectedly rose 0.3% in Sep, above expectation of -0.3%. Canadian wholesales sales dropped -1.5% mom in Aug. UK PSNCR rose sharply from 5.07b to 12.6b in Sep. UK Rightmove house prices posted -4.9% yoy fall in Oct, the biggest annual decline in at least six years. Australian PPI rose faster than expected by 2.0% qoq in Q3 with yoy rate up from 4.7% to 5.6%. Germany PPI rose 0.3% mom, 8.5%, also above expectation. USD/CHF Mid-Day Outlook Daily Pivots: (S1) 1.1308; (P) 1.1351; (R1) 1.1410; More USD/CHF's break of 1.1486 high indicates that recent up trend has likely resumed. At this point, further rise is expected as long as 1.1321 minor support holds. Further rally should be seen to next upside target of 1.1596 medium term resistance. On the downside, though, below 1.1321 will argue that USD/CHF is still bounded in consolidation and should test 1.1126 support again before resuming recent up trend. In the bigger picture, medium term rally from 0.9634 is still in progress and is targeting 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, below 1.0944 is needed to be the first signal that such up trend has topped out. Otherwise, medium term outlook remains bullish even in case of another pull back.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:01	GBP	U.K. Rightmove hse prices M/M Oct	1.00%	N/A	-1.00%
23:01	GBP	U.K. Rightmove hse prices Y/Y Oct	-4.90%	N/A	-3.30%
00:30	AUD	Australia PPI Q/Q Q3	2.00%	0.90%	1.00%
00:30	AUD	Australia PPI Y/Y Q3	5.60%	N/A	4.70%
06:00	EUR	Germany PPI M/M Sep	0.30%	-0.40%	-0.60%
06:00	EUR	Germany PPI Y/Y Sep	8.30%	7.50%	8.10%
08:30	GBP	U.K. PSNCR M/M Sep	12.6B	10.1B	5.12B	5.07B
12:30	CAD	Canada Wholesale sales M/M Aug	-1.50%	N/A	2.30%	2.70%
14:00	USD	U.S. Leading indicators Sep	0.30%	-0.30%	-0.50%
14:00	USD	Bernanke Testifies at House Budget Committee on Economy