Mid-Day Report: Dollar Indifferent to Housing Rebound, Aussie Surges with Gold

US new residential construction data posted surprisingly strong results in April and offered some hope to the markets that a turnaround in the housing markets may be in sight.. Housing starts climbed by a robust 8.2% to 1.032m annualized rate, largest monthly increase in more then two years. Building permits also beat expectation by rising 4.9% to 0.978m annualized rate. Though, the greenback received little support from the data and remains range bound against Euro and Sterling. Though U of Michigan consumer sentiments deteriorated further to 59.5 in May.

The biggest rally mover today is seen in the Aussie which is boosted by a strong rebound in gold prices as well as improved risk appetite of investors. Technically speaking, firstly, AUD/USD's break of 0.9505 resistance indicates is taken as a signal that rise from 0.9275 as well as the rally from 0.8953 have resumed. 24 years high of 9541 should be taken out by the current rally. Secondly, note that the correction in Gold from 1032.20 could have already completed after touching an important clusters support at 845 level (07 high). The current rise from there will likely extend further to retest 950 resistance zone at least, which should in turn provided further support to the Aussie to take out the mentioned 24 years high.

The rally in yen is short lived today. Q1 GDP growth from Japan was surprisingly resilient, registering 0.8% qoq growth, with 3.3% yoy rate, beating expectation of 0.6% qoq and 2.5% yoy. Q4's growth was revised down from 0.9% qoq, 3.5% yoy to 0.6% mom, 2.6% yoy. Nevertheless, the growth is still maintaining solid momentum after turning negative last Q2. Other data from Japan saw industrial production contracting at -0.7% yoy in Mar, worse than expectation of -0.4%. Consumer confidence dropped from 37 to 35.4. Technically speaking, intraday outlook in yen crosses are generally neutral and more retreat could be seen in USD/JPY, EUR/JPY and GBP/JPY. Nevertheless, there is no confirmation of the completion of the rebounds that started earlier this month. Price action could remain choppily consolidative.

AUD/USD Mid-Day Outlook

Daily Pivots: (S1) 0.9322; (P) 0.9371; (R1) 0.9451; More

AUD/USD's rally extends strongly today. Break of 0.9505 resistance reaffirms the case that price actions from 0.9505 to 0.9291, though deep, was just correction to rally from 0.9275 only. On the other hand, correction from 0.9541 should have completed at 0.9275 already and rise from there should present resumption of rally from 0.8953. In short, intraday bias is now the upside and rise from 0.9291 should extend to above 0.9541 high to 61.8% projection of 0.8512 to 0.0.9496 from 0.8953 at 0.9561 first. On the downside, below 0.9442 minor support will turn intraday outlook neutral first. But retreat should be contained well above 0.9291 support and bring rally resumption.

In the bigger picture, as mentioned before, as long as short term rising trend line (0.7675 to 0.8512, now at 0.9130) holds, recent up trend should still be in force. Such rally is treated as resumption of long term up trend from 0.4773 (01 low) is still expected to extend further to next medium term target of 100% projection of 0.4773 to 0.8008 from 0.6773 at 1.0008 which overlaps with parity.

However, break of the mentioned trend line support will argue that price actions from 0.7675 was probably in form of a diagonal triangle which has already completed. This will also argue that rally from 0.7015 has also completed with five waves up too. In other words, an important medium term top is in place and, deeper decline should then be seen at least to 0.8870 medium term resistance turned support.

Forex News Digest

• North American Market Recap: U.S. Housing Starts Leading to Bond Sell-off
• Housing Starts in U.S. Rise; Single-Family Construction Hits 17-Year Low
• U.S. Stocks Advance on Speculation Slump in Real Estate May Be Subsiding
• Dollar Rises Against Yen on Increase in U.S. Housing Starts Last Month
• Euro May Decline to $1.5285 in Two Weeks on MACD Chart, Forecast's Ng Says
• Australian Dollar to Advance on China Investment, Export Demand, RBC Says
• Overnight News Recap: Strong Japanese Q1 GDP, Euro Zone Trade, ECB Speakers
• Japanese Q1 GDP Growth Surges On Back of Net Exports and Consumption
• Anchoring Inflation Expectations Key for Central Bank, Says ECB's Liikanen
• European Market Recap: European Equities Higher along with German Bonds
• Inflation Risks on Upside, Rates Should Help Curb Inflaton, Says ECB's Mersch
• Inflation Rising Worldwide, No Change in Stance, Says ECB's Constancio
• Price Stability Essential For Economic Growth, Says ECB's Trichet

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