Dollar recovered mildly earlier today, helped by disappointing data from Eurozone. However, the greenback quickly loses steam in early US session as risk appetite is back in driving seat. Stocks in US open mildly higher and the strength intensify after release of better than expected housing data. Pending home sales in US unexpectedly rose 3.2% mom in Mar while construction spending also rose 0.3% mom.
Dollar index's rebound was unconvincing and it's still bounded in tight range above 83.89. Outlook is still mixed but favor is mildly on the bearish case as long as 86.01 resistance holds. That is, choppy rise from 82.63 is merely correction to the fall from 89.62 and has completed with three waves up to 86.87 already, with fall from there resuming decline from 89.62. Below 823.63 will 83.89 will target 82.63 low next.
Released earlier, Switzerland SVME PMI improved to 34.7 in April (consensus: 34, March: 32.6), the first time that the reading rose since November 2007, and it indicated that decline in manufacturing activities may bottomed. Manufacturing PMIs in Germany and the Eurozone as a whole were revised upward to 35.4 (preliminary: 35) and 36.8 (preliminary: 36.7) respectively in April. However, the Sentix investor confidence plunged to -34.3 in May following a -35.3 decline a month ago. The market originally anticipated a strong improvement to -28. Germany retail sales unexpectedly dropped -1.0% mom in Mar versus expectation of 0.2% growth.
Aussie shrugged off deeper than expected house price decline in Q1 and soared to 7 month high against dollar. The house price index dropped -2.2% qoq in 1Q09, worse than consensus of 0% and a downwardly revised -1.2% in the previous quarter. Aussie traders are turning their focus to tomorrow's RBA rate decision where RBA is expected leave rates unchanged at 3.00%.
China's Manufacturing PMI rose from 52.4 to 53.5 in Apr, staying in expansionary region above 50 for the second consecutive months. New orders continued to increase as domestic demand in China picked up following the massive fiscal stimulus from the Chinese government. New export orders also improved further to 49.1, just a touch below neutral level of 50. In addition, the Association of Southeast Asian Nations, together with Japan, China and South Korea, announced a $120b foreign currency reserve pool by the end of the year to revive investor confidence.
USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 1.1804; (P) 1.1877; (R1) 1.1926
USD/CAD's decline extends further to as low as 1.1769 in early US session and at this point, intraday bias remains on the downside as long as 1.1977 minor resistance holds. Nevertheless, we're still expecting strong support at support zone of 1.1464/1761 and will continue to look for reversal signal. On the upside, above 1.1977 will indicate that an intraday low is in place. Further break of 1.2503 resistance will indicate that whole fall from 1.3063 has completed and will turn short term outlook bullish.
In the bigger picture, there is no change in USD/CAD's outlook that price actions from 1.3015 are developing into consolidation in whole up trend from 0.9056 (07 low). The interpretation is bit different that such consolidation might be in three wave structure (1.1464, 1.3063, .....). Nevertheless, we're still treating fall from 1.3063 as the final leg in the consolidation. Having said that, while further downside could still be seen, strong support is expected as USD/CAD enters into support zone of 1.1464/1761 (with 55 weeks EMA at 1.1646 and 55 months EMA at 1.1624 too) to conclude such consolidation. Hence, focus will be on reversal signal there. However, note that sustained break of 1.1464 will significantly raise the chance that whole up trend from 0.9056 has completed and will turn medium term outlook bearish for deeper decline.