Dollar continues to made fresh lows against GBP, AUD and CAD as investors sentiment continue to be boosted by today's manufacturing data from China. Euro also manages to extend recent rally against the greenback despite being pressured in commodity crosses. China's manufacturing PMI cam is at 53.1 in May, slightly below April's 53.5 but stay above 50 for the third consecutive months, suggesting that the manufacturing sector is maintaining its modest pace of expansion. Economists are expecting the recovery in Chinese economy to gather pace as accelerating investment and consumer demand will boost industrial production. Nikkei rises by another 155 pts to 9677 while Hong Kong's HSI rises another 600 pts as the week starts.
US Treasury Geithner said in Beijing that non one is more concerned about future deficits than we are, and reaffirmed that US's goal is to bring down the deficit to “roughly 3 percent” of GDP from a projected 12.9 percent this year. Geithner also reiterated that US is committed to a strong dollar and said that China's investment in US assets are very safe. Markets paid little attention to Geithner's comments anyway.
Technically, dollar index dives through 79 level today and is still maintaining downside momentum. The index continued to be pressured by strength in major currencies, except yen, as well as commodity prices. Indeed, Crude oil extends recent rally to as high as 67.74 so far today while GOld also climbs further to as high as 986.9 so far. There is no clear sign of stabilization in the dollar index yet and further decline is expected to wards key support of 77.69, with 61.8% retracement of 70.70 to 89.62 at 77.92. We'd continue to look for reversal signal as dollar index approaches this key support zone but before anything solid, short term outlook remains bearish.
On the data front, Australia retail sales rose less than expected by 0.3% mom in Apr. Finalized manufacturing PMI in Eurozone will be released. UK manufacturing PMI will also be featured and is expected to climb from 42 to 44 in May, close to 50 contraction/expansion level. From Canada, March GDP is expected to contract by -0.3% mom. IPPI and RMPI are expected to rise 0.2% and 7.0% mom respectively. From US, PErsonal income and spending are both expected to drop by -0.2% in Apr. Core PCE is expected to climb from 1.8% yoy to 1.9% yoy. ISM manufacturing index will catch most attention today and is expected to improve from 40.1 to 42. COnstruction spending is expected to drop by -1.8% mom in Apr.
AUD/USD Daily Outlook
AUD/USD's rally accelerates further to as high as 0.8091 so far today and is staying firmly above 0.8 psychological level. At this point, intraday bias remains on the upside and further rally could be seen to 61.8% retracement of 0.9849 to 0.6008 at 0.8382 next. On the downside, below 0.7990 will turn intraday outlook neutral first but a break of 0.7442 support is needed to signal that a short term top is formed. Otherwise, outlook remains bullish.
In the bigger picture, while current rally is strong without a doubt, there is no change in the view that price actions from 0.6008 are treated as correction to down trend from 0.9849 only. Having said that, firstly, current rally is still expected to terminate inside resistance zone of 0.7802/8519, with 61.8% retracement of 0.9849 to 0.6008 at 0.8382 in between and hence we'd start to look for reversal signal. A break below 0.7742 support will be the first signal that a short term top is at least formed and will turn focus to 0.6998 support for confirmation that whole rise fro 0.6284 has completed. However, note that sustained break of 0.8519 resistance will seriously dampen this view and argue that the sharp decline from 0.9849 to 0.6008 was indeed a correction to long term rally from 0.4773 to 0.9849 only. And in such case, stronger medium rise could then be seen to retest 0.9849 high.
Economic Indicators Update
|1:30||AUD||Retail Sales s.a. M/M Apr||0.30%||0.50%||2.20%|
|7:55||EUR||German PMI Manufacturing May F||39.1||39.1|
|8:00||EUR||Eurozone PMI Manufacturing May F||40.5||40.5|
|8:30||GBP||PMI Manufacturing May||44||42.9|
|12:30||CAD||GDP Annualized Q1||-6.50%||-3.40%|
|12:30||CAD||GDP M/M Mar||-0.30%||-0.10%|
|12:30||CAD||IPPI M/M Apr||0.20%||0.30%|
|12:30||CAD||RMPI M/M Apr||7.00%||12.10%|
|12:30||USD||Personal Spending Apr||-0.20%||-0.20%|
|12:30||USD||Personal Income Apr||-0.20%||-0.30%|
|12:30||USD||PCE Deflator Y/Y Apr||0.30%||0.60%|
|12:30||USD||PCE Core M/M Apr||0.20%||0.20%|
|12:30||USD||PCE Core Y/Y Apr||1.90%||1.80%|
|14:00||USD||ISM Manufacturing May||42||40.1|
|14:00||USD||ISM Prices Paid May||35.5||32|
|14:00||USD||Construction Spending M/M Apr||-1.80%||0.30%|