Daily Report: Consolidations Continue, Focus Turn to Services Data and ADP Employment

Forex markets are generally staying in tight range as consolidations continue. There isn't much inspiration from other markets even though DOW closed at another high at 9320 yesterday while Gold breached 970 level briefly. Markets' focus will turn to services data today including finalized readings of services PMI from Eurozone, services PMI from UK and ISM non-manufacturing composite from US. Another main focus will be ADP employment report which will provide a preview to the highly anticipated Non-Farm Payroll on Friday.

Canadian dollar is showing some sign of loss of momentum after recent rally. Canadian Finance Minister Flaherty voiced out the concern on rapid appreciation of the Loonie and said there are steps that could be taken to "dampen" that. The comments are viewed as reiteration of the concerns of BoC Governor Carney and raised some concerns that more verbal intervention would be seen in case of further strength in the Canadian dollar.

Gfk consumer confidence in UK rose more than expected to the highest level in a year at 60 in July. Confidence was lifted by signs of improvement in the housing markets as Nationwide house prices showed third consecutive month of rise in July. Sterling remains firm against dollar and Euro. PMI services will be released in European session and is expected to stay above 50 at 51.8 in July. Industrial production is expected to be flat mom in June while manufacturing production is expected to drop slightly by -0.1%.

From Eurozone, services PMI is expected to finalize at 45.6 in July. Retail sales is expected to rise slightly by 0.3% mom in June with yoy rate improved to -2.2%.

From US, ADP employment report is expected to show -335k contraction in the private job market in July, a significant improvement from June's -473k. ISM non-manufacturing index is expected to rise from 47 to 48 in July. Factory orders is expected to be flat in June.

Technically, with 4 hours MACD crossed above signal line, some more consolidation could now be seen in the dollar index. However, upside is expected to be limited by 78.48 resistance and bring fall resumption. As discussed before, note that decline from 89.62 is displaying a five wave structure and some sizeable rebound should be seen after completing the five wave sequence. Secondly, the fall from 89.62 is indeed viewed as the third (and also the last) leg of whole consolidation pattern that started at 88.46 and such consolidation is expected to end with the current fall. Hence strong support should be seen inside the current 75.89/77.69 support zone and we'll monitor for loss of momentum and reversal signal as the index approaches 75.89 support level.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.0647; (P) 1.0706; (R1) 1.0781; More.

Breaking of 1.0751 minor resistance, with 4 hours MACD crossed above signal line suggests that an intraday low is in place at 1.0631 in USD/CAD. Intraday outlook is turned neutral and some consolidations could be seen. Nevertheless, recovery is expected to be limited by 1.0932 resistance and bring fall resumption. Below 1.0631 will target 61.8% retracement of 0.9056 to 1.3063 at 1.0587 next. However, considering bullish convergence conditions in 4 hours MACD and RSI, break of 1.0932 will indicate that a short term bottom is formed and stronger rebound should then be seen.

In the bigger picture, the break of 1.0784 low confirms that whole decline from 1.3063 is resuming. But after all, there is no change in the view that it's a correction to the five wave rally from 0.9056. Fall from 1.3063 might extend to 61.8% projection of 1.3063 to 1.0784 from 1.1723 at 1.0315, but such decline is still expected to conclude inside support zone of 1.0297/0819. Though, above 1.1723 resistance is now needed to indicate that this fall has completed. Otherwise, risk remains on the downside in case of rebound.

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