Mid-Day Report: Dollar Broadly Lower on Risk Appetite, Greece Still Awaited

Dollar is broadly lower today as risk appetites are lifted by German bill auction and bank stocks. Germany sold EUR 2.54b of 12-mont h bills today at average yield of 0.07%. That yield was much lower than October's 0.346%. The auction attracted solid demand of EUR 5.53b of bids. Meanwhile, banking stocks in UK saw impressive strength with strong advance in RBS, Lloyds and HSBC leading FTSE and other major European indices higher. Dollar index is back below 80 psychological level and is set to take on 79.51 support.

Main focus remain on Greece and the EcoFin meeting in Eurozone. There is no details announced on Greece's debt swap deal with private sector yet. But it's believed that private bond holders are willing to take a loss of around 65 to 70% off their Greek debts. However, it's still uncertain however the over deal could help Greece lower debt to 120% of GDP in 2020. EU finance ministers gather in Brussels today to examine the plan, as well as discuss new budget rules and firewall protection of Eurozone countries from the sovereign crisis.

Australia PPI rose less than expected by 0.3% qoq, 2.9% yoy in Q4. Markets expected 0.4% qoq, 3..0% yoy. Though, the year-on-year rate was above prior quarter's 2.7% yoy. Markets are expecting Wednesday's CPI release to show moderation from 3.5% yoy to 3.3% yoy, which would leave door open for further rate cut from RBA in February after cutting in November and December. Looking ahead, the economic calendar is light today with Canadian leading indicators and Eurozone consumer confidence featured.

BoJ will be a main focus tomorrow though it would likely be non-event. The bank is expected to take a wait-and-see stance and keep things unchanged tomorrow, including keeping benchmark rate unchanged at 0-0.1%. Though, additional quantitative easing measures are expected later this year to support domestic recovery.

Dollar sharp decline today affirms the bearish case that rebound from 72.69 is finished at 81.78, just below 100% projection of 72.69 to 79.84 from 74.72 at 81.86. Focus remains on 79.51 support and break will affirm this case and target 74.72 support.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9308; (P) 0.9339; (R1) 0.9372; More...

USD/CHF's strong break of 0.9304 support indicates that rise from 0.8567 is already finished at 0.9594 on bearish divergence condition in 4 hours MACD. Also, considering bearish divergence in daily MACD too, whole rebound from 0.7065 might be completed too. Intraday bias is back on the downside for a test on 0.8567 key support level next. On the upside, though, above 0.9375 minor resistance will dampen this immediate bearish case and turn bias neutral first.

In the bigger picture,we're treating rebound from 0.7065 medium term bottom as part of a consolidation pattern only. Hence, strong resistance is expected at next cluster level at 0.9916 (61.8% retracement of 1.1730 to 0.7065 at 0.9948, 61.8% projection of 0.7065 to 0.9315 from 0.8567 at 0.9958) to limit upside and bring reversal. Meanwhile, break of 0.8567 support should mark the completion of whole rebound form 0.7065 and turn outlook bearish.

Economic Indicators Update

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box