Daily Report: Dollar Pares Gains as Markets Stabilize

Markets stabilize in today's Asian session with dollar and yen giving back some of yesterday's sharp gain. Asian stocks opened lower following yesterday's -223 pts fall in DOW but recover. While much volatility was seen during the week, no breakthrough is seen in the markets yet and major currencies are settling back into last week's range even though some general strength is seen in the greenback on yesterday's rebound. With US markets on holiday today, it's likely that markets will remain indecisive to close the week. Though, some more volatility might be seen in European session with Eurozone retail sales, UK PMI Services and Swiss CPI featured.

Swiss CPI is expected to be flat mom in Jun, and drop -1.1% yoy. Such reading will represent the largest annual drop in inflation in at least 33 years. Swissy's recovery against Euro is still in progress and is so far a bit stronger than expected but it should just be a matter of time when EUR/CHF's rally resumes. From Eurozone, finalized services PMI is expected to be unrevised at 44.5 in Jun but beware of revisions. Retail sales in Eurozone is expected to drop -0.2% mom, -2.8% yoy in May. UK PMI services is expected to drop slightly from 51.7 to 51.5 in Jun but remain above 50.

Technically, there are two developments worth attention. Firstly, crude oil is now pressing double top neckline support at 66.37. Secondly, dow is possibly forming a head and shoulder top too. If both patterns are confirmed, dollar and yen will likely be boosted up on risk aversion. So, next week will likely be pivotal.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.1524; (P) 1.1578; (R1) 1.1686; More.

While rebounded strongly, USD/CAD is still limited below 1.1653 as well as 38.2% retracement of 1.3063 to 1.0784 at 1.1655. Outlook remains neutral for the moment. A short term top is in place on bearish divergence conditions in 4 hours MACD and RSI. Some more consolidation could be seen with risk of another pull back. But after all, downside is expected to be contained by 1.1226 clusters support (50% retracement of 1.0784 to 1.1653 at 1.1219) and bring rally resumption. Above 1.1653 will bring a test of 1.1814 resistance. However, note that a break of 1.1226 will be an important signal that whole rebound from 1.0784 has completed and will turn outlook bearish for retesting this low

In the bigger picture, fall from 1.3063 is treated as correction to impulsive rally from 0.9056 to 1.3063 and has met target support zone of 1.0297/0819 already. We're slightly favoring the case that such correction has completed at 1.0784 already. Break of mentioned 1.1475/1.1814 resistance zone will confirm this case and should at least bring strong rally to key cluster resistance at 1.2191 (61.8% retracement of 1.3063 to 1.7084 at 1.2192). Nevertheless, a break below 1.1226 cluster support will indicate that such rise from 1.0784 has completed. In addition, the corrective structure will aurge that fall from 1.3063 is still in progress, probably to 61.8% retracement of 0.9056 to 1.3063 at 1.0587 before completion.

Economic Indicators Update

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