Mid-Day Report: Dollar Sharply Lower as ADP Showed -10k Contraction

Dollar is sharply lower against Euro and Swissy in early US session after release of much worse than expected ADP employment report. The report showed the private job market unexpectedly contracted by -10k in August versus consensus of 20k expansion. Challenger job report showed planned layoff dropped -54.5% yoy in August. Dollar index extends earlier fall today and reaches as low as 82.33, way off yesterday's close of 83.20. Markets' focus will now turn to ISM manufacturing index to be released later in the US morning.

Sterling is noticeably lower against Euro today after release of much weaker than expected PMI manufacturing. The PMI data dropped sharply from a revised 56.9 to 54.3 in August versus consensus of 54.3. The data suggests that manufacturing sector in UK is slowing much quicker than market thought and dampens the outlook for recovery in the second half. This is also in contrast to Eurozone PMI which was revised slightly up to 55.1 in AUgust. Swiss SVEM PMI dropped sharply from 66.9 to 61.4 in August.

Aussie continues to be the strongest currency today as boosted by strong GDP data from Australia as well as solid data from China. Australia Q2 GDP rose 1.2% qoq, 3.3% yoy, easily beat expectation of 0.9% qoq, 2.8% yoy. China. PMI manufacturing rose slightly more than expected to 51.7 in August while HSBC manufacturing PMI also rose back above 50 to 51.9.

Dollar index's consolidation from 83.56 continues with another sharp fall today. Intraday bias remains on the downside for 81.92 support but we'd expect strong support from there to conclude the consolidation and bring resumption of rally from 80.08. However, note that decisive break of 81.92 will argue that whole rebound from 80.08 is finished and will pave the way for another lower below 80.08 before whole fall from 88.70 completes.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0102; (P) 1.0183; (R1) 1.0231; More.

USD/CHF's fall extends further to as low as 1.0064 today so far and intraday bias remains on the downside to lower trend line support (now at 1.0040) and possibly further towards parity. Though, we'd anticipate strong support at around parity to contain downside, at least initially. However, sustained trading below parity will pave the way to 0.9916 key support level. On the upside, above 1.0180 minor support will turn intraday bias neutral and bring consolidations. But break of 1.0330 support turned resistance is needed to be the first sign of bottoming. Otherwise, outlook will remain bearish.

In the bigger picture, USD/CHF is possibly in the process of forming a medium term sideway pattern that started at the long term bottom of 0.9634 (2008 low). The pair will continue to stay in converging range of 0.9634/1.2296 for a while. A break of either 0.9916 support or 1.1729 resistance is needed to indicate that USD/CHF is back into a directional trend. Otherwise, medium term outlook will remain neutral.

Economic Indicators Update

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