Daily Report: Dollar Weakness Continues, BoJ on Hold, SNB Next

Dollar's fall continues today as trends in the overall financial markets extend. Following 1.12% rally in DOW, Asian stocks are broadly higher. Nikkei drew further support from medium term trend line and rebounds 1.68% today. Gold's rally is still in progress and reaches as high as 1025.8 so far while crude oil extends the rebound to 72.70. Dollar index is now pressing 76 level. Among the major currencies, Aussie, Canadian and Euro are the strongest against the greenback and the up trend in theses currencies are still in favor to continue in near term. On the other hand, Sterling remains generally the weakest major currency.

BoJ left overnight lending rate at 0.1% on unanimous vote as widely expected. The asset-buying program and emergency lending program to banks and corporations are also kept unchanged. In the accompanying statement, BoJ upgraded assessment of the economy from "stopped worsening" to "showing signs of recovery" and called for growth to begin in second half of 2009 fiscal year. The bank cited a rebound in exports and public spending as underpinning a recovery, but pointed to weak consumer spending and surging unemployment as risks.

Swiss National Bank announcement is the main focus today. SNB is is expected to leave the three-month Libor target unchanged at 0.25% at today's quarterly meeting. Rates are indeed expected to be held steady for the rest of the year as well as most part of 2010 to help sustain recovery as the Swiss government exit from its fiscal stimulus. The main focus is needed on any change in the currency policy. The bank has been buying currency on an ad hoc basis to weaken the Swiss Franc and ease threat of imported deflation. The bank is keen to prevent a protracted period of deflation and will likely remain on guard to intervene in the currency market if the franc starts to strengthen.

On the data front, UK retail sales is expected rise modestly by 0.1% mom in August. Eurozone trade surplus is expected to widen slightly to EUR 1.2B in July. Canadian CPI is expected to show 0.2% mom rise, -0.6% yoy fall in August. US housing s starts and building permits are expected to improve mildly in August. Philly Fed index is expected to rise further to 7.8 in September.

Dollar index's decline continues and extends further to as low as 76.03 so far. Intraday bias remains on the downside and further decline should be seen to 75.89 key support. We're still anticipating strong support from this level to conclude recent down trend. But a break of 76.57 resistance is needed to be first sign of stabilization. Otherwise, further decline is still in favor.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.8655; (P) 0.8702; (R1) 0.8780; More

AUD/USD's rally is still in progress and reaches as high as 0.8768 so far today. Intraday bias remains on the upside and further rise should be seen to 61.8% projection of 0.6284 to 0.8262 from 0.7702 at 0.8924 next. On the downside, though, below 0.8679 minor support will turn intraday outlook neutral and bring consolidation. But downside should be contained by 0.8543 support and bring rally resumption.

In the bigger picture, AUD/USD is trading above medium term rising trend line (0.6284, 0.7702) and thus, rise from 0.6282, and that from 0.6008, is still in progress. The strength of the rise from 0.6008 and the firm break of 0.8519 resistance argue that AUD/USD is developing into another up trend. In other words, long term correction from 0.9849 has possibly completed at 0.6008 already, after being support slightly above 76.4% retracement of 0.4773 (01 low) to 0.9849 (08 high). Having said that, the current rally from 0.6008 might extend further to retest 0.9849 high next.

On the downside, below 0.8239 support will have the medium term rising trend line firmly broken and thus argue that a medium term top is formed. Some deep pull back and lengthy consolidation might then be seen, with prospect of fall to 0.7267/7702 support zone. But a break of 0.7267 resistance turned support is needed to indicate that whole rise from 0.6008 has completed. Otherwise, we'll continue to favor the longer term bullish case even in case of deep correction.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	BSI Manufacturing index Q/Q Q3	15.5	-11.4	-13.2
23:50	JPY	Tertiary Industry Index M/M Jul	0.60%	0.60%	0.10%	0.20%
3:30	JPY	BoJ Interest Rate Decision	0.10%	0.10%	0.10%
8:30	GBP	Retail Sales M/M Aug		0.10%	0.40%
8:30	GBP	Retail Sales Y/Y Aug		2.70%	3.30%
9:00	EUR	Eurozone Trade Balance (EUR) Jul		1.2B	1.0B
10:00	GBP	U.K. CBI Industrial Orders Sep		-49	-54
11:00	CAD	CPI M/M Aug		0.20%	-0.30%
11:00	CAD	CPI Y/Y Aug		-0.60%	-0.90%
11:00	CAD	BoC CPI Core M/M Aug		0.10%	0.00%
11:00	CAD	BoC CPI Core Y/Y Aug		1.60%	1.80%
12:00	CHF	SNB Interest Rate Decision		0.25%	0.25%
12:30	CAD	Leading Indicators M/M Aug		--	0.40%
12:30	USD	Housing Starts Aug		595K	581K
12:30	USD	Building Permits Aug		580K	560K
12:30	USD	Initial Jobless Claims (SEP 12)		558K	550K
14:00	USD	Philadelphia Fed. Survey Sep		7.8	4.2