Daily Report: Dollar Firm on Discount Rate Speculations

Dollar is steady in Asia after yesterday's extended rebound on speculation of another discount rate hike from Fed before next meeting on April 28. Meanwhile, Euro is consolidating some of the sharp losses on uncertainty over Greece as well as the selloff against Swiss Franc. The Franc was bid sharply high overnight after comments from SNB Danthine that the bank cannot prevent Franc's appreciation indefinitely. There are some fresh sellings on sterling in early European session as its recovery lost momentum. Commodities are staying in tight range as crude oil continues to struggle to take out near term resistance of 83.16 while gold also consolidates this week's gain at around 1120 level.

Fed raised discount rate in February as a move to "normalize" the lending facilities and signaled that it's not a change in the outlook for monetary policy or the economy. The Fed Board of Governor head a "general discussion of discount window matters" this week. Historically, the discount rate is 1% above the target fed fund rates and current at 0.75%, there is certain room for another hike for the "normalization". Dollar is lifted by speculations that Fed will make the discount rate before before next FOMC meeting on April 28.

SNB board member board member Jean-Pierre Danthine said yesterday that Swiss firms and consumers should prepare for rising borrowing costs and exchange rates set freely by the market. The comment triggered sharp buying in the Franc on speculation that SNB is done with the intervention. But Danthine then clarified that "it's too early to counter last week's statement. The SNB will counter an excessive appreciation of the Swiss franc."

Sterling is lower as prevent recover lost moment and on comments from BoE Sentance that there is a risk Britain may suffer a double-dip recession, although it was not the most likely scenario.

On the data front, Japan all industry index rose more than expected by 3.8% mom in January./ German PPI was flat mom, dropped -2.9% yoy in February. Main focus today will be on Canadian data. CPI is expected to rise 0.3% mom, 1.4% yoy in February with core CPI up 0.3% mom, 1.6% yoy. Retail sales is expected to rise 0.5% mom, 0.6% yoy in January.

Looking at the dollar index, touching of 80.43 resistance argues that choppy consolidation from 81.34 has possibly completed at 79.51 already, after being supported by 79.56 cluster support (38.2% retracement of 76.60 to 81.34 at 79.52) as expected. Intraday bias is cautiously on the upside and more rise should be seen to retest 81.34 high next. On the downside, while some retreat might be seen, we'd continue to expect strong support from 79.56 to contain downside. .

EUR/CHF Daily Outlook

Daily Pivots: (S1) 1.4339; (P) 1.4411; (R1) 1.4469; More

EUR/CHF's fall accelerated to as low as 1.4354 yesterday before recovering. At this point, intraday bias remains on the downside and further fall should be seen to mentioned target of 1.4315 key support next. On the upside, above 1.4406 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 1.4557 support turned resistance and bring fall resumption.

In the bigger picture, current development confirms that EUR/CHF's fall from 1.5880 has resumed. Also, as the cross is still staying well below a falling 55 weeks EMA, current decline might be resuming longer term down trend from 2007 high of 1.6827. Next medium term target will be 100% projection of 1.5880 to 1.4557 from 1.5446 at 1.4123 after taking out 1.4135 low (2008 low). On the upside, break of 1.4820 spike resistance is needed to be first signal of bottoming. Otherwise, outlook will remain bearish.

Economic Indicators Update

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