Daily Report: Swiss Franc to Take Over Euro's Leading Strength?

Dollar index extended the sharp decline to as low as 78.22 before recovering mildly. The broad based weakness in the greenback is still overwhelming in the markets but after all as the greenback is now sitting in side an important support zone of 75.89 to 80.38, some support should be seen in near term as the greenback approaches 61.8% retracement of 71.31 to 88.46 at 77.86. It's unclear on whether dollar's up trend has totally finished but some noticeable rebound should be seen on oversold condition in near term. The critical factor to determine dollar's outlook will indeed be on whether another fall will be seen after the anticipated rebound to make the whole fall from 88.46 a five wave impulsive sequence, or will such fall complete in three wave corrective manner. This should be decided in the next few weeks and will set the tone for 2009.

Euro remains one of the biggest beneficiary of dollar's recent reverse in fortune with EUR/USD surging to as high as 1.4437 so far. EUR/GBP continues to make new record high everyday and is set to continue strength as recent up trend accelerates further towards 161.8% projection of 0.7808 to 0.8660 from 0.8234 at 0.9613. EUR/CAD has already taken out mentioned 1.7 psychological resistance and will likely continue the rise towards next projection level of 100% projection of 1.3285 to 1.6322 from 1.4716 at 1.7753. After all, the common currency will remain strong in general.

One important development that some traders might miss is the strength in Swiss Franc. Indeed, the Swissy is so far the top winner this month, even gaining more than Euro. Note that GBP/CHF has cleared out an important all time low of 1.7537 and dived to as low as 1.6557 so far. EUR/CHF reversed sharply this week, right after hitting an important fibonacci level of 1.6827 to 1.4315 at 1.5867 and 55 weeks EMA at 1.5848. The development is taken as an alert that EUR/CHF's rebound from 1.4315 might be completed at 1.5880. Break of 1.5163 support will add much credence to this case. In other words, beware that even if Euro will continue it's strength, the Swissy might be taking over the leading role gradually.

Elsewhere, the Japanese yen retreats mildly on speculations of intervention. Japan FM Nakagawa said that the country will "take necessary steps if needed" to limit yen's advance and protect the overseas earnings of Japanese exporters.

Released today so far, Japan machine orders dropped -62.1% yoy in Nov. Swiss Trade surplus unexpectedly widened to 2.15B in Nov.

Looking ahead, Germany Ifo business climate is anticipated to remain in downward trend in December. Consensus figure of 84 showed the 6th consecutive decline since Jun 08. Trade deficit is expected to have narrowed to -4.5B euro, better than -5.6B in the previous month.

In the UK, economists forecast improvement in public sector finance with net cash requirement (PSNCR) expanded to 11.65B pound in November from -4.91B pound in October. On the hand, November retail sales in the nation should have contracted further to -0.6% mom from -0.1%.

Swiss retail sales in November should have dropped to 1.9% mom from 6.4%.

The US Labor Department will release initial jobless claims for the week ended Dec 13. Consensus of 558K addition indicates a decline from the seasonally-quirked (post-Thanksgiving week in Dec 6) figure in the previous week. November leading indicated is expected to come in at -0.5%, the 4th decline in 5 months, due to plunging building permits and stock market. As economic activities have slowed down very sharply since the second half of 2008, December Philly Fed should have weakened further to -40.5 from -39.3 last month.

In Canada, leading indicators in November should have dropped 0.4% while retail sales is expected to have contracted 1% mom in November after rising 1.1% in October.