Daily Report: Dollar Recovers On Prospect Of Budget Deal

Dollar recovers mildly on the prospect of a budget agreement. US Senate Budget Committee Chairman Senator Patty Murray and House Budget Committee Chairman Representative Paul Ryan introduced a bipartisan budget plan worth of US$ 85B on Tuesday, hoping to end 3 years of impasse and fiscal instability in the world's biggest economy. President Obama, urging the Congress to approve the plan, stated that it is a "good first step". The plan, rather than automatic "sequestering" spending, allows federal agencies and discretionary programs to spend US$ 63B more over 2 years. Spending cuts would be made in other areas. For instance, there would be a US$6B cuts in federal workers' retirement benefits and another US$ 6B in cuts to military pensions. It would also provide an additional US$ 20-23B in deficit reduction over 10 years. Republican House speaker Boehner noted that "while modest in scale, this agreement represents a positive step forward".

Technically, the dollar index remains pressured. The rebound from 79.00 has finished at 81.482 and fall from there would now extend back to key support zone near to 50% retracement of 72.69 to 84.75 at 78.72. We won't be too bearish in the dollar index yet as long as as this 78.72 fibonacci level holds. It might only be developing into a sideway pattern between 78.60 and 84.75. And, above 81.482 resistance will turn outlook bullish for a test on 84.75 resistance. However, sustained break of 78.72 will open up the medium term bearish case and could pave the way back to 72.69 low.

On the data front, Australia Westpac consumer confidence dropped -4.8% in December. Japan machine orders rose 0.6% mom in October, domestic CGPI rose 2.7% yoy in November. German CPI final reading will be released in European session. US will release monthly budget statement. RBNZ is expected to keep rates unchanged at 2.50% in the next Asian session.