Daily Report: Dollar's Mild Rebound Continues

Market Overview | Written by ActionForex.com | Jul 17 08 06:52 GMT |

Dollar fought back yesterday on the back of strong rally in the stock markets, pullback in oil prices, and a stronger than expected CPI reading but the momentum is so far mild. Fed minutes might sound a bit more hawkish than Bernanke's testimony, noting that some committee members said that “some firming in policy would be appropriate very soon” to fight inflation. Nevertheless, markets are not that convinced yet with interest rates futures showing 41% chance of a hike by Dec, down from 44% a week ago. Another critical factor to the possibility of Fed's move is the situation in the housing markets. The National Association of Home Builders (NAHB) housing market index showed homebuilders confidence dropped to a new record low of 16 in Jul. New residential construction data will be released today and is expected to show further deterioration in building permits and housing starts in Jun. It will be hard for the Fed to remove policy accommodations if markets can't see an end to the housing recession. Philly Fed survey and jobless claims will also be released today. Other event to be focused today include Swiss ZEW and Bank of Canada Monetary Policy Report. AUD/USD Daily Outlook Daily Pivots: (S1) 0.9712; (P) 0.9764; (R1) 0.9799; More AUD/USD's retreat from 0.9849 is still in progress and with an intraday top in place at 0.9849, further pull back could still be seen to 4 hours 55 EMA (now at 0.9674). But downside should be contained well above 0.9475 support and bring rally resumption. As discussed before, prior break of near term trendline resistance reaffirms underlying strength in AUD/USD. Above 0.9849 will indicate recent rally has resumed for 1.0000 psychological resistance. In the bigger picture, the whole rally from 0.8512 is still in progress. Also, note that the break of near term trend line resistance and break out of bearish divergence conditions in daily MACD and RSI are both reaffirming the underlying strength in AUD/USD. Regardless of the structure, such rally is treated as part of the long term up trend from 0.4773 (01 low) and 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. On the downside, break of 0.9475 support is needed to be the first signal that a short term top is formed. Otherwise, recent uptrend is still expected to extend further.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
09:00	CHF	Swiss ZEW index Jul		-67	-63.8
12:30	USD	U.S. Building permits Jun		0.960M	0.978M
12:30	USD	U.S. Building permits M/M Jun		N/A	-0.40%
12:30	USD	U.S. Housing starts Jun		0.96M	0.975
12:30	USD	U.S. Housing starts M/M Jun		N/A	-3.30%
12:30	USD	U.S. Jobless claims Jun		378K	346K
14:00	USD	U.S. Philadelphia Fed survey Jul		-14.8	-17.1
14:30	CAD	BOC Monetary Policy Report