Daily Report: Dollar Soft as Markets Consolidate

  @ibtimes on December 07 2009 7:40 AM

Dollar trades with a soft tone today and markets digest last week's sharp post-NFP moves. Nikkei jumped another 1.45% to close at 10167 in response to Friday's sharp fall in the Japanese yen but Asian stocks are generally mixed elsewhere. Gold is a touch weaker today but is holding above Dubai low of 1127.6 so far while crude oil continues to struggle around 75/76 level. The economic calendar is rather light today and markets may continue to consolidate for a while.

Taking about yen, last week's sharp selloff indicates that the short term buying climax is definitely over. It's a bit early to call for medium term reversal against the dollar and sterling. But yen looks vulnerable to a new low against commodity currencies. For example, CAD/JPY's strong rebound from 79.89 leaves the price actions from 90.28 in three waves in form of a falling wedge which suggests that it's merely consolidation in the larger rally from 68.38. The pair seems set for a test of 88.26 resistance at least and a break there will bolster the bullish case for rally resumption to 90.28 cluster resistance and above.

On the data front, Swiss retail sales is expected to grow 1.2% yoy in October, up from prior month's -1.6% yoy. Eurozone Sentix investor confidence is expected to improve from -7 to -4.1 in December. German factory orders are expected to rise 0.7% mom in October. Canada building permits are expected to rise 1.0% mom in October.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.4754; (P) 1.4922; (R1) 1.5023; More

EUR/USD recovers mildly today and the break of 1.4894 minor resistance suggests that an intraday low is in place at 1.4820 and turns bias neutral for the moment. Some consolidations could be seen but upside is expected to be limited well below 1.5037 resistance and bring fall resumption. Below 1.4801/20 support zone will target 1.4626 support next.

In the bigger picture, the failure to break through 1.5143 resistance and subsequent sharp fall and break of 1.4828 support revives the case that EUR/USD has topped out at 1.5143 already. Focus now turns to 1.4626 support and break there will confirm that case rise from 1.2456 has finished at 1.5143 already, on bearish divergence conditions in daily MACD and RSI. This will also mark the completion of the whole three wave consolidation pattern from 1.2329 and the whole down trend from 1.6039 is possibly resuming for another low below 1.2329 in such case.

On the upside, another high above 1.5143 cannot be ruled out for the moment. But after all, even in case of another rise, we'd expect strong resistance at 123.6% projection of 1.2329 to 1.4719 from 1.2456 at 1.5410 to conclude the medium term rise from 1.2456 eventually.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised

08:15
CHF
Retail Sales Y/Y Oct
 
1.20%
-1.60%
 

09:30
EUR
Eurozone Sentix Investor Confidence Dec
 
-4.1
-7
 

11:00
EUR
German Factory Orders M/M Oct
 
0.70%
0.90%
 

11:00
EUR
German Factory Orders Y/Y Oct
 
-6.20%
-13.10%
 

13:30
CAD
Building Permits M/M Oct
 
1.00%
1.60%
 

17:00
USD
Fed's Bernanke Speaks
 
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