Markets are rather calm in general as the week starts with dollar and yen recovering mildly. With a nearly empty economic calendar today, volatility may recede a little bit. Also, as dollar index is now pressing an important support level at around 82, some profit taking might be seen in dollar shorts. Nevertheless, the recovery could be temporary as there is no clear change in the trend of risk appetite yet and investors may still continue to look into this week's load of economic data for reasons to send stocks higher.
Released overnight, Australia's NAB business confidence dropped slightly to -14 in April from -13 a month ago. However, when compared with record low of -32 in January, the reading indicated confidence level has stabilized significantly. Looking ahead, in Canada, new housing price index is expected to have dropped -0.5% mom in March after falling -0.7% in the previous month. Fed Chairman Ben Bernanke will also speak on stress tests at 2330 GMT.
Technically, the dollar index is now drawing some support from important cluster support level of 38.2% retracement of 70.70 to 89.62 at 82.39, 61.8% retracement of 77.79 to 89.62 at 82.24 and 55 weeks EMA at 82.19. Some more recovery might be seen. But as mentioned in our weekly report, we're expecting extension of recent rally in stocks and commodities and that would likely continue to pressure dollar. Hence, upside of recovery in the dollar index will likely be limited below 84.41 resistance and bring fall resumption that eventually push the index through 821.19/39 support zone. A break of 84.41 resistance is needed to abolish this bearish view.
AUD/USD Daily Outlook
AUD/USD retreats mildly after edging higher to 0.7710 earlier today. But still, intraday bias remains on the upside as long as 0.7505 minor support holds. Decisive break of mentioned 0.7475 fibo resistance should now set the stage for further rally towards 50% retracement of 0.9849 to 0.6008 at 0.7929. On the downside, below 0.7505 will turn intraday outlook neutral and bring further retreat. But pull back should be contained by channel support at 0.7165 and bring rally resumption.
In the bigger picture, the firm break of 0.7475 fibo resistance indicates that much stronger medium term rebound is underway. But after all, there is no change in the view that rise from 0.6248 is the third leg of a correction pattern that started at 0.6008, which correct the whole fall from 0.9849 to 0.6008. Having said that, the current rise should now extend further to 0.7802/8519 resistance zone, with 61.8% retracement of 0.9849 to 0.6008 at 0.8382, and conclude there. Also, below 0.6988 support is now needed to indicate that AUD/USD has topped out.
Economic Indicators Update
|1:30||AUD||Australia NAB Business Confidence Apr||-14||--||-13|
|12:30||CAD||Canada New Housing Price Index M/M Mar||-0.50%||-0.70%|
|23:30||USD||Bernanke Speaks on Stress Tests||--||--|