Mid-Day Report: Dollar Quietly in Range, Yen Mildly Lower

Markets are generally quiet as the week is close to end. Dollar remains bounded in tight range against most major currencies. The Japanese yen dips mildly even though US stock market is set to have a lower open. The Canadian dollar is lifted mildly after data showed wholesale sales jumped 1.6% mom in May, beating expectation of 0.5%. Canadian leading indicator, on the other hand, was flat in Jun, below expectation of 0.1% rise. Other data released today German PPI climbed to 26 year high of 6.7% yoy in Jun. Eurozone trade balance showed wider than expected deficit of -4.6b in Jun.

Sterling continues to trade with an undertone on speculation that UK Chancellor Darling will introduce a new set of spending guidelines that would allow for breaking of limits of public-sector debt but reaction is so far limited. ECB Trichet reiterated that the bank is committed to maintaining medium term price stability and getting inflation back to "below 2 percent, close to 2 percent" and emphasize the importance of avoiding "second-round effects". Trichet also said that economic growth in the Eurozone will stall in Q2 and Q3 before returning to "moderate" growth.

BoJ minutes released overnight revealed that members are divided on the future course of monetary policy. Some members are still alerted about inflationary pressures. On the other hand, some members emphasized that the focus on slowing economic growth.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 0.9996; (P) 1.0037; (R1) 1.0096; More.

USD/CAD's recovery from 0.9974 extended further and touching of 1.0069 minor resistance with 4 hours MACD staying above signal line indicates that an intraday low is probably in place. Intraday outlook is neutral for the moment. As discussed, before, with 0.9957 support zone (100% projection of 1.0322 to 1.0048 from 1.0230 at 0.9964) still holds, price actions from 1.0322 is still treated as correction to rally from 0.9818 only. Above 1.0081 minor resistance will encourage further rise to 1.0230 resistance first. Break will confirm that correction from 1.0322 has completed and bring rally to retest this high.

In the bigger picture, after all, USD/CAD is still staying in established range of 0.9709 and 1.0378. The corrective nature of the price actions inside this range argues that it's merely consolidation to the whole rebound from 0.9056. While further choppy sideway trading could still be seen, the rise from 0.9056 is still expected to extend further as long as 0.9709 support holds. Break of 1.0378 will bring rise to 61.8% projection of 0.9056 to 1.0378 from 0.9709 at 1.0526 and above. Though, break of 0.9709 support will indicate that the correction from 0.9056 could have completed and short term bias will then be turned back to the downside for retesting this low.

Forex News Digest

• European Market Update: Equities Higher, EUR/USD Down
• Overnight News Recap: Central Bank Governors Speak; Euro Zone Trade Balance
• Bank of Japan Releases Minutes to June 12 and 13 Meeting
• Policy Balances Falling Growth and Rising Inflation Risks, Says BOJ's Shirakawa
• BOE's Gieve Expects Inflation at "Well Over" 4% for the Rest of 2008
• Austrian PPI Rises 0.4% Monthly, 2.7% Yearly in May
• Trichet Reiterates ECB Committed to Med-Term Price Stability
• Dollar Heads for Weekly Gain Versus Euro as Banks Weather Credit Turmoil
• Dollar's Advance May Stall at 107.17 Yen on Charts, Bank of America Says
• British Pound, Gilts Slide on Speculation Government to Boost Borrowing
• Darling Considers Changes to U.K. Spending Limits After Growth Revisions
• Lehman Says Sell Australian Dollar Against Yen on Economic Growth Outlook

More Forex News

Economic Indicators Update

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box