Dollar recovers mildly today as Asia stocks are calm despite yesterday's 221 pts rally in DOW. Gold retreats sharply from yesterday's high and is back pressing 970 level while crude oil turns sideway and both are providing some support to the greenback. Note that the dollar index is showing some sign of stabilizing and while the short term outlook remains bearish, a bottom may not be too far away. The Japanese yen also recovers mildly following dollar. Aussie is mildly software after RBA left rates unchanged and adopted a easing bias in the statement.
RBA left rates unchanged at 3.0% as widely expected. Aussie is mildly softer as the bank sees scope for further easing on prospect of inflation decline over medium term and inflation is expected to continue to abate over the next two years. Nevertheless, the statement sounded upbeat, affirming that the global economy is stabilizing and considerable stimulus in most countries is helping to contain the downturn. The bank also acknowledged the turnaround is clearest is China and some emerging markets while recovery in major countries will take longer.
On the data front, Swiss Q1 GDP contracted -0.8% qoq, -2.4% yoy, worst performance in 15 years. SVME PMI is expected to rise from 34.7 to 36.5 in May. UK Mortgage approvals is expected to rise from 39k to 41k while PMI construction is also expected to rise from 38.1 to 39.5 in May. Eurozone unemployment rates is expected to jump further from 8.9% to 9.1%. From US, Pending home sales is expected to rise slightly by 0.3% mom in Apr.
Technically speaking, the dollar index recovers mildly after making an intraday low at 78.59. More importantly, bullish convergence condition is being displayed in 4 hours MACD and RSI, suggesting downside momentum is diminishing. It's early to call for a bottom yet and with 81.13 resistance intact, another fall is still likely. Nevertheless, we'd holding on the view that the current fall from 89.62, which is treated as part of the consolidation that started at 88.46, will be contained by key support of 77.69, with 61.8% retracement of 70.70 to 89.62 at 77.92. Hence, we'd continue to focus on reversal signal in the next fall.
USD/CAD Daily Outlook
USD/CAD recovers after diving to as low as 1.0784, meeting mentioned target of 100% projection of 1.2503 to 1.1475 from 1.1814 at 1.0786. Break of 1.0931 minor resistance indicates that an intraday low is in place and some consolidation could now be seen. Nevertheless, note that a break of 1.1256 resistance is needed to be the first signal that a short term bottom is formed, otherwise, another fall is still in favor. Below 1.0784 will target 61.8% retracement of 0.9056 to 1.3063 at 1.0587 next.
In the bigger picture, as mentioned before whole medium term up trend from 0.9056 has completed at 1.3063 and fall from there entered into 1.0297/1.0819 support zone as expected. Note that due to the impulsive nature of the rise from 0.9056 to 1.3063, fall from there is treated as correction in the larger up trend only and will likely be contained by mentioned 1.0297/1.0819 support zone, with 61.8% retracement of 0.9056 to 1.3063 at 1.0587 inside. Hence, focus will remain on reversal signal as USD/CAD re-enters into this support zone again.
Economic Indicators Update
|1:30||AUD||Current Account Balance (AUD) Q1||-4.614B||-5.425B||-6.499B||-6.357B|
|4:30||AUD||RBA Interest Rate Decision||3.00%||3.00%||3.00%|
|5:45||CHF||GDP Q/Q Q1||-0.80%||-1.50%||-0.30%||-0.60%|
|5:45||CHF||GDP Y/Y Q1||-2.40%||-1.70%||-0.60%||-0.60%|
|7:30||CHF||SVME PMI May||36.5||34.7|
|8:30||GBP||Mortgage Approvals Apr||41K||39K|
|8:30||GBP||M4 Money Supply M/M Apr F||--||0.10%|
|8:30||GBP||M4 Money Supply Y/Y Apr F||--||17.40%|
|8:30||GBP||PMI Construction May||39.5||38.1|
|9:00||EUR||Eurozone Unemployment Rate Apr||9.10%||8.90%|
|14:00||USD||Pending Home Sales M/M Apr||0.30%||3.20%|