The strength in Canadian dollar is clearly felt across the board. CAD/JPY rebounds sharply from this week's low of 89.94 and is pressing 93 level. Recent rally is set to resume for another high above 94.26 and should target next key medium term level of 50% retracement of 50% retracement of 125.52 to 68.38 at 96.95 next.
Elsewhere, dollar and yen continued to weaken today as impact of the Goldman case faded even though UK FSA said that it will begin a formal probe on the company. Sterling was lifted by much stronger than expected inflation reading of 3.4% yoy in March. Though, Euro failed to ride of strong ZEW readings, which saw German ZEW up from 44.5 to 53 in April. Aussie is strong along with Canadian dollar as supported by hawkish RBA minutes which suggests another hike in May. New Zealand dollar under-performs after tamer than expected inflation data with CPI rose merely 0.4% qoq, 2.0% yoy versus expectation of 0.6% qoq, 2.3% yoy.
Dollar index's rebound lost steam after hitting 81.28 yesterday. The rebound from 80.04 was so far not stronger enough to suggest that correction from 82.24 was over. As noted before, price actions from 82.24 should be correcting the five wave rally from 74.19 and we'd probably see more sideway trading in near term, with risk of another fall to 79.51 before the index stages another medium term rise.
USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 1.0112; (P) 1.0164; (R1) 1.0193; More.
USD/CAD's sharp fall today sent the pair through 1.0100 minor support decisively and argues that correction from 0.9952 might be completed at 1.0214 already. Nevertheless, as USD/CAD is still held above 0.9952 low, we'll stay neutral for the moment. Break of 0.9952 will indicate that medium term down trend has resumed and should target 0.9823 support next. On the upside, above 1.0100 will bring more sideway consolidations first.
In the bigger picture, while the outside week bar last week suggests that a short term bottom is formed, it's still premature to call for medium term reversal yet. Whole decline from 1.3063 could still continue as part of the consolidation pattern that started at 0.9056 and drop towards 100% projection of 1.3063 to 1.0784 from 1.1723 at 0.9444. However, note that break of 1.0779 resistance will indicate that fall from 1.3063 is finally finished will turn turn outlook bullish for stronger rally.