Dollar weakens sharply today on the back of exceptional strength in precious metals. Gold future break 1007.1 psychological level in Asia today and reaches as high as 1006.4 so far. Meanwhile Silver future also climbs more than 3% to as high as 16.85. The greenback continues to make new low against Aussie and Kiwi and is set to break out from range against Euro and Swissy. Asian stocks are generally higher with Nikkei up another day by 0.7%. However, yen is steadily in range in crosses so far, helped by weakness in USD/JPY. Crude oil recovers mildly but is still limited below 70 level. As noted before, Gold is likely resuming its long term up trend and will continue to pressure the greenback. But the selling might be, to a certain extent, limited unless crude oil does rebound strongly from its medium term trend line support and roars back above 70.
On the data front, Japanese current account surplus narrowed to 1.16T in July. Eco watch survey: current dropped from 42.4 to 41.7 in August. Australia NAB business confidence improved from 10 to 18 in AUgust. Swiss unemployment rate rose less than expected to 4.0% in August. German trade surplus widened to 13.8b euros in July. Looking ahead, UK industrial production and manufacturing production are expected to show 0.2% mom and 0.3% mom growth in July. German industrial production is expected to rise 1.6% mom in July. Canadian building permits is expected to rise 0.5% mom in July.
Looking at the dollar index, break of 77.76 support indicates that the fall from 79.51 is resuming. The index is still trading well within medium term falling channel, which indicates that the fall from March high of 89.62 is still in progress, and is likely resuming now for a new low below 77.43. Short term outlook will remain bearish as long as 78.93 resistance holds. Nevertheless, we'd expect further loss of downside momentum as the index approaches next key support of 75.89 and finally bring reversal.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.4299; (P) 1.4330; (R1) 1.4362;
EUR/USD rises sharply to as high as 1.4396 today so far and is set to take on 1.4405 resistance. Intraday bias is cautiously on the upside for the moment. Break of 1.4405 will indicate that whole rise from 1.4045 is resuming for 1.4446 and above. But we'd expect further loss of momentum and upside should be limited by upper trend line resistance at 1.4504 and bring reversal. On the downside, below 1.4328 will turn intraday outlook neutral again. Further break of 1.4177 support will favor the case that rebound from 1.4045 has completed at 1.4405 already. In such case, intraday bias will be flipped back to the downside for 1.4045 low next.
In the bigger picture, there is no change in the view that rise from 1.2456 is the third leg of the whole consolidation pattern that started at 1.2329. Price actions from 1.3747 may be developing into a diagonal triangle as the fifth wave in such five wave sequence from 1.2456 and should be close to completion. While another high above 1.4446 is possible, upside should be limited by 61.8% retracement of 1.6039 to 1.2329 at 1.4622 and finally bring reversal. On the downside, below 1.4045 support will be another signal that EUR/USD has already topped out and break of 1.3747 support will be the confirmation. In such case, deeper decline should be seen that sends EUR/USD through 1.2329 low eventually.
