Dollar's recovery was brief and selloff resumed today, taking the dollar index below recent support of 76.88. US economic data released so far are largely ignored by the the market even though we saw sharp jump in personal income by 1.0% in January. Spending growth was disappointing by 0.2% only. Core PCE was unchanged at 0.8% yoy while PCE deflation was also unchanged at 1.2% yoy. Canadian dollar, on the other hand, extends recent rise after strong GDP growth of 0.5% mom in December.
Euro shrugged off downward revision in January CPI from 2.4% yoy to 2.3%. Core CPI rose 1.2% yoy. Inflation reading remained above ECB's target of 2% for a second month. The more important piece of data would be CPI flash for February, which is due tomorrow and is expected to be at 2.4% yoy. Meanwhile, the common currency continues to be supported by anticipation of stronger languages on inflation from ECB later this week. The tone of Trichet's press conference will be important for Euro to break through recent resistance of 1.3860 against dollar.
Other data released today saw New Zealand trade balance unexpectedly turned to NZD 11M surplus in January. Japan manufacturing PMI rose to 52.9 in February, industrial production rose 2.4% mom, 4.7% yoy in January while retail sales rose 0.1% yoy and housing starts rose 2.7% yoy.
RBA meeting will be the next focus in Asian session. Policymakers appear to be comfortable with an above-neutral policy rate for now. Therefore, it's highly likely that the central bank will pause again at the March meeting, leaving the cash rate at 4.75%. The accompanying statement is expected to contain little surprises as much was talked during a speech (by Governor Glenn Stevens) in Melbourne last week. Compared with the previous meeting, the new information would be on the heightened inflation outlook as induced by recent rally in oil prices. The Governor may also want to talk about the impacts of a slowdown in Chinese growth. More in RBA Comfortable With Current Rates, Weighs Growth Higher Than Inflation
Dollar index's break of 76.88 support today indicates that recent decline from 81.31 has resumed. Intraday bias is back on the downside and deeper fall should be seen to 61.8% projection of 81.31 to 76.88 from 78.87 at 76.13. On the upside, above 77.42 minor resistance will turn intraday bias neutral first. But break of 78.87 is needed to indicate reversal. Otherwise, near term outlook will remain bearish for 75.63 low.
USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 0.9755; (P) 0.9793; (R1) 0.9814; More.
USD/CAD drops further to as low as 0.9745 so far in early US session and intraday bias remains on the downside, Current decline is expected to continue towards 0.9709 support next. As noted before, we're still seeing bullish convergence condition in daily MACD and thus, we're anticipating strong support from 0.9709 to bring rebound. On the upside, above 0.9788 minor resistance will flip bias back to the upside and turn focus back to 0.9957 resistance. However, note that sustained break of 0.9709 will invalidate this view and target 0.9056 key support level instead.
In the bigger picture, whole medium term fall from 1.0363 (2009 high) is still in progress and such down trend should continue to 0.9709 support first and possibly further towards 2007 low of 0.9056. Nevertheless, fall from 1.3063 is still looking corrective and hence, we'd expect strong support between 0.9056/9709 to contain downside and bring another medium term rise. Though, break of 1.0851 resistance is needed to confirm medium term reversal. Otherwise, medium term outlook will remain bearish.
Economic Indicators Update
|21:45||NZD||Trade Balance (NZD) Jan||11M||-25M||-250M||-264M|
|23:15||JPY||Nomura/JMMA Manufacturing PMI Feb||52.9||--||51.4|
|23:50||JPY||Industrial Production M/M Jan P||2.40%||3.60%||3.30%|
|23:50||JPY||Industrial Production Y/Y Jan P||4.70%||5.90%||4.90%|
|23:50||JPY||Retail Trade Y/Y Jan||0.10%||-1.50%||-2.10%|
|02:00||NZD||NBNZ Business Confidence Feb||34.5||--||29.5|
|05:00||JPY||Housing Starts Y/Y Jan||2.70%||5.10%||7.50%|
|10:00||EUR||Eurozone CPI Y/Y Jan F||2.30%||2.40%||2.40%|
|10:00||EUR||Eurozone CPI - Core Y/Y Jan F||1.20%||1.20%||1.10%|
|13:30||CAD||Current Account (CAD) Q4||-11.05B||-9.4B||-17.5B||-17.0B|
|13:30||CAD||GDP M/M Dec||0.50%||0.30%||0.40%|
|13:30||USD||Personal Spending Jan||0.20%||0.40%||0.70%|
|13:30||USD||Personal Income Jan||1.00%||0.40%||0.40%|
|13:30||USD||PCE Core M/M Jan||0.10%||0.20%||0.00%|
|13:30||USD||PCE Core Y/Y Jan||0.80%||0.80%||0.70%||0.80%|
|13:30||USD||PCE Deflator Y/Y Jan||1.20%||1.40%||1.20%|
|14:45||USD||Chicago PMI Feb||68||68.8|
|15:00||USD||Pending Home Sales M/M Jan||-2.50%||2.00%|