Dollar pares gains in early US session after release of GDP report that showed the contraction of US economy was not as worse as expected. Advanced GDP report showed -3.8% annualized contraction against expectation of -5.4%, following -0.5% contraction in Q3. But after all, it's still the worst reading since 1982. Personal consumption dropped by -3.5%, slightly better than -3.8% in Q3. Another surprise was in the price index which dropped -0.3% versus expectation of 0.5%. Q4 employment cost index rose 0.5%, below expectation of 0.7%. From Canada, GDP in Dec dropped -0.7%, worse than consensus of -0.4%.

Aussie is leading the markets today, dropping over 2% against dollar and yen. In particular, the break of 0.6419 confirms down trend resumption in AUD/USD. USD/CAD's break of 1.2330 also clears out the picture and revive original bullish outlook for 1.3005/15. EUR/GBP stabilizes a bit after the sharp fall to 0.8943. Dollar Index's rise is still in force to 86.81 resistance first.

Eurozone's CPI eased to 1.1% yoy in January, much lower than market expectation of 1.4% and 1.6% in December. This was also the lowest reading since Jul 1999. On the other hand, unemployment rate rose to 2-year high of 8% in December from a revised 7.9% in the previous month. Euro remains generally pressured, in particular against Sterling which is supported by unexpected rise in UK mortgage approvals from 27k to 31k.

Released in earlier today, Japan manufacturing PMI fell to 29.6, the lowest level since 2001 and the 11th consecutive month below 50, in January from 30.8 in December as the country's export was greatly affected by economic slowdown. January unemployment rate increased to 4.4%, above consensus of 4.2% and December's 3.9%. At the same time, household spending contracted -4.6% yoy, worse than market expectation of -3.8% decline and -0.5% drop in the previous month. Japan's national CPI rose 0.4% yoy in December following a 1% gain in November while core inflation adding 0.2% yoy, the lowest reading since October 2007, after a 1% annual increase in the previous month. As a leading indicated to the nationwide index, Tokyo core CPI in January eased to 0.5% after rising 0.8% in the previous month. Tokyo's overall inflation also came in at 0.5% yoy in December. Japan's industrial production slid severely by a record -9.6% mom in December, worse than consensus of -9% and -8.5% in November. On yearly basis, the gauge plunged -20.6% from -16.6% a month ago. Although better than consensus of -8%, Japan's housing starts plunged for the first time in 6 months by -5.8% in December. Construction orders also fell -27.3% in December after dropping -12.5% a month ago. UK Gfk consumer confidence dropped to -37 in January, the lowest in 6 month, after falling to -33 in December.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2145; (P) 1.2205; (R1) 1.2321; More .

USD/CAD's break of 1.2330 minor resistance clears out the near picture and indicates that fall from 1.2765, though deeper than expected, has completed at 1.2024 as correction to rise from 1.1761. Intraday bias is flipped back to the upside for 1.2765 first and break will bring retest of 1.3005/15 resistance zone. On the downside, however, below 1.2211 minor support will mix up the outlook again.

In the bigger picture, there is no confirmation of completion of medium term up trend from 0.9056 yet. Such rise is expected to be developing into a five wave sequence (1.0378, 0.9823, 1.3015, ......). Consolidation from 1.3015 is treated as the fourth wave consolidation. Failure below 1.3005 suggests that such consolidation is still in progress and a test of 1.1464 support could be seen before completion. On the upside, note that decisive break of 1.3005/15 will confirm medium term up trend resumption and should then target 61.8% retracement of 1.6196 to 0.9056 at 1.3469.