Mid-Day Report: Dollar Mildly Lifted by ISM Services

After consolidating for most of the day, dollar is lifted mildly after better than expected services report. The ISM non-manufacturing index surprised the markets by climbing from 49.6 to 52.0 in Apr, back in the expansion region have three months of contractionary readings. Price paid component surged further to 72.1. Employment component improved remarkably from 46.9 to 50.9. However, the business activity component, though staying above 50, showed some weakness by falling from 52.2. to 50.9. Nevertheless, the boost on the greenback is so far mild and it looks as if the markets will continue to consolidate further.

Elsewhere Aussie remains firm on strong house price inflation data released overnight that climbed 3.1% qoq, 13.8% yoy, up from prior 3.2% qoq, 12.3% yoy. Focus turns to tomorrow's RBA rate decision which is widely expected to be on hold at 7.5%. Canadian dollar is mildly higher on rebound in oil prices but it's just staying in tight range. Sterling is the weaker one today but after all it's still staying in established range against the dollar.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0488; (P) 1.0548; (R1) 1.0631; More

USD/CHF turns into sideway trading after reaching as high as 1.0606. Though, intraday bias remains mildly on the upside as long as 1.0462 minor support holds. With 100% projection of 0.9634 to 1.0249 from 0.9887 at 1.0502 taken out, next upside target will be 161.8% projection at 1.0902. On the downside, below 1.0462 will indicate that an intraday top is in place. But pull back should be contained above 1.0296 support and bring rally resumption.

In the bigger picture, firm break of 1.0352/83 resistance zone (50% retracement of 1.1105 to 0.9634 at 1.0370 and 38.2% retracement of 1.1596 to 0.9634 at 1.0383) indicates that decline from 1.1596 has completed and a medium term bottom is probably in place at 0.9634 . Sustained trading above 55 days EMA (now at 1.0341) supports this case too. Further rebound should then be seen to resistance zone of 1.0890 to 1.1596. With 38.2% retracement of 1.3283 to 0.9634 at 1.1028 inside the range, strong resistance should be seen there, at least initially. On the downside, break of 0.9995 support is needed to confirm rebound from 0.9634 has completed. Otherwise, another rise is still in favor even in case of deep pull back.

Forex News Digest

• European Market Update: Euro Zone Stocks Slide as UK Observes Bank Holiday
• Overnight News Recap: EU Investor Confidence Slows, Aussie Inflation Rises
• Canadian Interest Rates May be Headed Back Up, Says CIBC Report
• Australian Q1 Housing Price Index Gains Slow
• ECB's Wellink Sees Improvements in Markets, Warns Against Drawing Conclusions
• ECB's Trichet Highlights Importance of Anchoring Inflation Expectations
• Bank of England Shadow MPC Narrowly Votes for No Change to Rates on Thursday
• Euro Advances on Speculation ECB to Keep Interest Rates at Six-Year High
• Canada's Dollar Rises From Three-Week Low as Prices of Commodities Advance
• Greenspan Says U.S. Is in a `Pale Recession' That May Extend Through Year
• Euro May Decline to $1.5124 on Break of Support at $1.5424, Forecast Says

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