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Daily Report: Dollar Mildly Softer as DOW Hit Record, Aussie Lifted by GDP Print E-mail
Market Overview | Written by ActionForex.com | Mar 06 13 05:58 GMT

Daily Report: Dollar Mildly Softer as DOW Hit Record, Aussie Lifted by GDP

Dollar weakened against commodity currencies and softened a bit against European majors as DOW jumped to close at record high at 14253. Investors sentiment were solid on expectation that Fed will continue its easing efforts after recent speeches by Fed chairman Bernanke and vice chairman Yellen. But the overall impact of risk sentiments on the currency markets were rather muted, as it has been lately. Euro is stuck in tight range above 1.3 against dollar for the moment and even sterling was limited well below a near term resistance at 1.5221 against dollar. Also, USD/CAD is holding well above 1.0216 minor support and there is no sign of steeper selloff yet. Yen crosses are also clearly stuck in range.

Recently, both Bernanke and Yellen had sounded dovish and defended Fed's open-ended asset purchase program. Bernanke stated that the Fed would 'continue purchases until it observes a substantial improvement in the outlook for the labor market'. Yellen also said that she still saw the balance of risks "calling for highly accommodative monetary policy to support a stronger recovery and more rapid growth in employment." Last week, Chicago Fed Evans warned of the danger of removing accommodation prematurely. Though, Richmond Fed Lacker warned yesterday that small mistakes in timing Fed's exit could have "large consequences". After all, Bernanke has emphasized he has backing from majority of Fed policy makers on continuing the stimulus.

Australian dollar and New Zealand dollar are the strongest performers this week so far. Aussie was supported by solid economic data this week. Australia GDP grew 0.6% in Q4, inline with expectation. Overall growth in 2012 was at 3.6%, strongest pace in fives years since 2007. Treasurer Swan hailed that "Australia's around-trend growth rate over the year is more than four times the OECD average." And he said that the country has managed to "achieve solid growth in the December quarter at a time when around half of all advanced economies contracted, including five major advanced economies." However, some economists pointed out that the details of the GDP report were weak as domestic demand remains below trend and the growth was too heavily dependent on exports.

At his last Government Work Report, Chinese Premier Wen Jiabao unveiled that the government retained its GDP growth target of 7.5% but reduced the CPI target to 3.5% from 4% last year. This was compared with PBoC Deputy Governor Yi Gang's CPI forecast of 3% in 2013. The report showed optimism over the country's economic outlook. While the economic recovery after the global financial crisis remained "full of uncertainty and not yet on a stable footing", the "considerably increased capacity" in the manufacturing sector, "significantly improved" infrastructure, high savings rates and large workforce act as "favorable conditions and positive factors" to sustain economic developments.

Looking ahead, BoC will be a main focus today as markets are expected the central bank to leave rates unchanged at 1.00%. BoC has noted that the need for rate like is "less imminent" in the last statements. But based on recent economic data and outlook, the central bank could even totally drop the tightening bias. And if that happens, we could seen another round of rally in USD/CAD. Other data to be watched include Eurozone GDP revision, US ADP employment, factory orders and Beige book. Canadian Ivey PMI.

AUD/USD Daily Outlook

Daily Pivots: (S1) 1.0207; (P) 1.0235; (R1) 1.0283; More...

AUD/USD's rebound extends further to as high as 1.0300 so far today. The break of 1.0289 minor resistance, as well as the near term falling channel resistance suggests that fall from 1.0597 is possibly completed at 1.0115 after a brief breach of 1.0148 support. intraday bias is now mildly on the upside for 1.0374 resistance first. Break should confirm this case and target 1.0597/0624 resistance zone. Though, below 1.0214 minor support will turn bias back to the downside for 1.0115 and below.

In the bigger picture, price actions from 1.1079 high are treated as a consolidation pattern in the larger up trend, in form of a triangle. Fall from 1.0624 is viewed as the last leg inside the pattern and could extend lower. But downside of the fall from there should be contained above 0.9588 and the larger up trend is ready to resume soon. Break of 1.0624 should send AUD/USD through 1.0852 to retest 1.1079 resistance next.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
0:01 GBP BRC Shop Price Index Y/Y Feb 1.10% 0.60%
0:30 AUD GDP Q/Q Q4 0.60% 0.60% 0.50% 0.70%
10:00 EUR Eurozone GDP Q/Q Q4 P -0.60% -0.60%
13:15 USD ADP Employment Change Feb 168K 192K
15:00 CAD BoC Rate Decision 1.00% 1.00%
15:00 CAD Ivey PMI Feb 56.2 58.9
15:00 USD Factory Orders Jan -2.10% 1.80%
15:30 USD Crude Oil Inventories 1.1M
19:00 USD Fed Beige Book

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