Mid-Day Report: Dollar Mildly Higher after Data

Dollar is gathering some strength in early US session, in particular against Sterling and Canadian dollar. Data from US saw person income dropped more than expected by -0.7% in Jul, spending rose 0.2%. Headline PCE jumped to 4.5% yoy, highest in 17 years while core PCE rose 2.4%. Chicago PMI improved to 57.9 in Aug, much stronger than expectation of 50.0. Finalized reading of Aug U of Michigan consumer sentiment also came in better than expected at 63.0. Technically speaking, dollar's rise against sterling is still in force. However, whether consolidation against other major currencies has completed remains to be seen.

Canadian dollar spikes lower after Jun GDP rose 0.1% mom. More importantly, Q2 GDP was weaker than expected by rising 0.3% only, below expectation of 0.7%. PPI rose 0.4% mom, 6.8% yoy in Jul.

Euro fails to extend rally against dollar after soft data. HICP flash moderated more than expected to 3.8% yoy in Aug. Business climbed dropped to -0.3, economic sentiment dropped to 88.8. Though, consumer confidence improved to -19. Unemployment rate was unchanged at 7.3% in Jul. Swiss KOF dropped more than expected to 0.68.

Data released from Japan showed general improvements. Unemployment rate dropped from 4.1% to 4.0% in Jul. Retail sales jumped more than expected by 1.9%. Housing starts rise further to 19% yoy. INdustrial production unexpected posted 0.9% mom gain in Jul, with yoy rate at 2.0%. Manufacturing PMI dropped less than expected to 46.9. More importantly, national CPI climbed to decades high of 2.3% yoy in Jul.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.0446; (P) 1.0492; (R1) 1.0553; More.

USD/CAD's rebound from 1.0410 extends further today, taking out 4 hours 55 EMA and reaches as high as 1.0565 so far. With 4 hours MACD turned positive, the fall from 1.0727 might have completed already. At this point, intraday bias is mildly on the upside. Break of 1.0593 resistance add more credence to this case and bring retest of 1.0727 high. Break will indicate recent rally has resumed for 1.0791/98 cluster resistance. On the downside, though, below 1.0468 will flip intraday bias back to the downside and argue that correction from 1.0727 is probably still in progress. Nevertheless, downside is expected to be contained above 1.0273 cluster support (61.8% retracement of 0.9974 to 1.0727 at 1.0262) and bring rally resumption.

In the bigger picture, medium term rise from 0.9056 is still in progress towards mentioned cluster resistance at 1.0791/98 (61.8% retracement of 1.1874 to 0.9056 at 1.0798, 61.8% projection of 0.9056 to 1.0378 from 0.9974 at 1.0791) first. Sustained break of 1.0791/98 will argue that rise from 0.9056 is probably more than just a correction in the long term down trend and will set the stage to test key long term resistance at 1.1874. On the downside, a break below 0.9974 support is needed to confirm that rise from 0.9056 has completed. Otherwise, further rally is still expected even in case of a deep pull back.

Forex News Digest

• Canadian Economy Avoids Technical Recession as Q2 GDP Grows
• European Market Update: German Bonds Higher After Slowing CPI, Economic Indexes
• Overnight News Recap: EU Flash CPI Falls Sharply, Jpn Embarks on Â¥11.7T Stimulus
• EuroStat Flash Estimate Sees EU Inflation at 3.8% in August
• Asia-Pacific Market Recap: Bonds & Equities Higher After Flurry of Japanese News
• European Economic Confidence Drops More Than Forecast as Recession Looms
• Oil Rises, Heads for Biggest Weekly Gain in Two Months as Storm Shuts Rigs
• Dollar Falls Against Euro as Personal Income Declines, Crude Oil Increases
• Australian, New Zealand Dollars Head for Monthly Decline on Rate Outlook
• U.K. Pound Headed for Monthly Loss as Confidence Holds Near a Record Low

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