Mid-Day Report: Dollar Mildly Firmer after Positive Jobless Claims Report Forex markets are generally staying in tight range today even though dollar is mildly firmly after solid employment data. Initial jobless claims, though, unexpectedly dropped to 364k in the week ended Dec 17, hitting the best figure since April 2008. Four week moving average of initial claims also improved to 380k, best since June 2008. Continuing claims dropped to 3.55m in the week ended Dec 10, the best number since September 2008. Though, Q3 GDP was revised lower to 1.8% annualized, comparing to expectation of being unchanged at 2.0%. Other data released today saw UK GDP revised up to 0.6% qoq in Q3. New Zealand Q3 GDP rose more than expected by 0.8% qoq. Fitch published a special report of "US Public Finances, An Update" yesterday that detailed the projections that unpinned the outlook downgrade of US's AAA sovereign rating back in November. Fitch expects federal debts held by the public will exceed 90% of GDP by the end of this decade. And that's based on the assumption that there will be no spending and tax reforms to address rising cost of health and security spending. Fitch noted that the rising debt burden is not consistent with the AAA rating. The rating agency could make a downgrade decision in the first half of 2013 unless the incoming Congress and administration in 2013 would "formulate a credible plan to reduce the budget deficit and stabilize the federal debt burden". Swiss Finance Minister Eveline Widmer-Schlumpf said in hearing in the lower house that a panel is still considering measures to weaken the Franc, including capital controls and negative interest rates. There have been continuous speculations that SNB would implement new measures including raising the EUR/CHF floor. But so far, SNB disappointed markets every time and EUR/CHF remains bounded in range below 1.25. USD/JPY Mid-Day Outlook Daily Pivots: (S1) 77.79; (P) 77.95; (R1) 78.22; More. Outlook in USD/JPY remains unchanged. Further rise is expected to extend the rebound from 76.57. Above 78.28 will target 100% projection of 76.57 to 78.28 from 77.13 at 78.84 and above. Nonetheless, note that such rebound is viewed as the second leg of the consolidation pattern from 79.52. Hence, we'd expect strong resistance below 79.52 to bring another near term fall to continue the consolidation, as the third leg. Meanwhile below 77.49 minor support will flip bias back to the downside for 77.13. Break will suggest that recovery from 76.57 is finished and target this support and below. In the bigger picture, note again that there is no sign of long term trend reversal in USD/JPY yet even though downside momentum is diminishing with bullish convergence condition in weekly MACD. USD/JPY is still trading inside the falling channel that started back in 2007 at 124.13, and below the falling 55 weeks EMA. Not to mention that it's far below the falling 55 months EMA. Rebound from 75.56 low could extend higher and beyond 80 psychological level. But it could turn out to be a corrective three wave rally in the end. So, we'd at least prefer to see sustained break of 55 weeks EMA (now at 79.98) before considering the case of reversal. And break of 85.51 resistance will need to confirm. Otherwise, anything happens now will be viewed as corrective and an eventual break of 75.56 low to 70 psychological level is still favored.

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