Yen extends recent rally in early US session while dollar remains firm following disappointment from US ADP employment report. Stocks open lower with S&P 500 staying below 1000 level while treasury yield dips mildly. Both are supporting the Japanese yen. On the other han, general weakness in commodities are supporting the greenback. In particular, crude oil dropped through 68 level to as low as 67.21 which gives additional pressure to Canadian dollar. Also, note that VIX surged through 29 level and took out August's high of 28.39 which argues that risk aversion might be coming back.

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ADP employment showed -298k contraction in August, worse than expectation of -250k. Challenger job cuts dropped -13.8% yoy in August. Non-farm productivity was revised up to 6.6% in Q2 due to downward revision in unit labor costs to -5.9%. Released earlier today, Eurozone Q2 GDP was unrevised at -0.1% qoq, -4.7% yoy. PPI dropped more than expected by -0.8% mom, -8.5% yoy in July. UK PMI construction rose less than expected to 47.7 in August. Australian Q2 GDP growth unexpectedly accelerated from 0.4% qoq to 0.6% qoq while yoy rate also surprised on the upside by rising faster at 0.6%. Markets expected to recovery to slow to 0.2% qoq, 0.3% yoy.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.0920; (P) 1.0993; (R1) 1.1115; More.

USD/CAD's rally resumes by taking out 1.1090 and at this point, intraday bias remains mildly on the upside as long as 1.1004 minor support holds. As discussed before, break of 1.1123 resistance will confirm that whole rally from 1.0631 has resumed and affirm the case that USD/CAD has indeed bottomed out already. In such case, stronger rise should be seen to 1.1723 resistance next. On the downside, below 1.1004 will turn intraday outlook neutral again. Also, note that break of 1.0718 support will indicate that price actions from 1.0631 are merely consolidation in the larger decline, which is still in progress for another low below 1.0631 before completion.

In the bigger picture, there is no change in the view fall from 1.3063 is correction to the five wave rally from 0.9056. Also, such correction is expected to conclude inside 1.0297/0819 support zone. On the upside, sustained break above trend line resistance at 1.1150 will be an important signal that such fall has completed and will turn focus to 1.1723 resistance for confirmation. On the downside, while another low below 1.0631cannot be ruled out, focus will remain on reversal signal in case of another fall.

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