Dollar continues to be pressured by structure in gold, as it breaks 1200 handle, as well as a return of risk appetitive as seen in broad based rally in US and European stocks. Dubai World has begun the conversation of banks to restructure the $26b debt and said that the remainder is on a stable financial footing. Sterling's rebound against dollar an Euro in reaction to the news is impressive. Data from US are mixed with ISM manufacturing dropped to 53.6 versus expectation of 55 in October while pending home sales and construction spending beat expectations.
Other data released today saw Swiss GDP grew 0.3% qoq, contracted -1.3% yoy in Q3. UK nationwide house prices rose 0.5% mom, 2.7% yoy in November. UK PMI manufacturing unexpectedly dropped to 51.8 in October. Eurozone unemployment was unchanged at 9.8% in November. PMI manufacturing was revised up to 51.2 in November.
After an emergency meeting held today, BoJ said it will provide 10T yen to make three month loans at 0.1% interests. Eligible collateral will include Japanese government bonds, commercial paper and corporate bonds. The bank said that it's most effective at present to further spread the strong effect of monetary easing and encourage a further decline in longer-term interest rates in the money market through provision of ample longer-term funds at an extremely low interest rate. This is in response to the government's call to support the economy that's facing risk of deflation as well as strong appreciation of the Japanese yen. Yen's reactions however, were mild so far as it's somewhat underwhelming as perceived by some economists, both in terms of the impact on economic recovery and the persistent strength in yen.
RBA raised rate for the third consecutive months by 25bps to 3.75% today as widely expected. This is indeed the first time RBA has raised rates at three consecutive meetings. In the accompanying statement, RBA maintained the economy assessment that growth is 2010 will likely to be close to trend with inflation close to target. And the believe that recent adjustments will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead.
Looking at the index, the rebound from 74.19 was rather short lived and the index should be heading to retest this low. Break there will bring medium term fall resumption but we'd anticipate some loss of downside momentum on next fall. Above 75.08 will turn intraday bias neutral but still, a break of 75.88 resistance is needed to be the first sign of bottom. Otherwise, outlook will remain bearish.
USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 1.0525; (P) 1.0569; (R1) 1.0606; More.
USD/CAD's break of 1.0448 support suggests that sideway consolidation pattern from 1.4160 has completed at 1.0748 already and fall from there is resuming the whole decline from 1.0851. At this point, intraday bias remains on the downside as long as 1.0532 minor resistance holds. Further fall should now be seen to 100% projection of 1.0851 to 1.0416 from 1.0748 at 1.0313 to complete the correction pattern from 1.0851. On the upside, above 1.0532 will turn intraday bias neutral first.
In the bigger picture, a medium term bottom might be in place at 1.0205 with bullish convergence conditions in daily MACD. As noted before, fall from 1.3063 is viewed as a correction to long term rise from 0.9056. Such correction might have already completed with three waves down to 1.0205 already (1.0784, 1.1732, 1.0205). Break of 1.1101 resistance will confirm this case and target 61.8% retracement of 1.3063 to 1.0205 at 1.1971 at least. On the downside, break of 1.0205 will invalidate this view and bring down trend resumption to parity instead.