Mid-Day Report: Dollar Rebounds Further after House Price Report

Market Overview | Written by ActionForex.com | Jul 29 08 13:20 GMT |

Dollar rebounds strongly today and remains firm after better than expected house price report. S&P/CaseShiller Composite-20 showed -15.8% yoy drop in May, down from prior -15.3% but was above expectation of -16.0%. Conference Board consumer confidence will be featured next and is expected to continue the down trend and dip further from 50.4 to 50.0. Technically speaking, dollar is still staying in tight range against most major currencies. Though, note that the rebound is EUR/USD, GBP/USD and AUD/USD has been disappointing and it fails far below near term resistance levels. Also, further fall in these pairs will firstly put key near term structure support back into focus. Secondly, it will leave the fall in EUR/USD from 1.6038 and AUD/USD from 0.9849 in five wave structure. In other words, this will argue that both EUR/USD and AUD/USD has already topped out and more downside will be seen in these pairs, at least in short term. This will also put these two pairs inline with the outlook is USD/JPY, USD/CHF and USD/CAD, i.e. more strength in dollar should be seen. Sterling was hit hard against dollar after CBI's industrial trades survey showed that 61% of respondents to the Distributive Trades Survey reported that sales in first half of July were lower than a year ago. Only 25% said sales had increased. That left the balance to -36%, which is the weakest record since the study started 25 years ago. Mortgage approvals dropped to 36k in May, which was also the lest level since at least 1999. Released earlier today Germany Jul CPI prelim was unchanged at 3.3% yoy, HICP prelim was unchanged at 3.5% yoy. Japanese unemployment rate unexpected climbed from 4.0% to 4.1% in Jun. Household spending dropped -1.8% yoy in Jun, better than expectation of -2.8%. Retail sales was flat mom in Jun, climbs 0.3% yoy. EUR/USD Mid-Day Outlook Daily Pivots: (S1) 1.5693; (P) 1.5730; (R1) 1.5777; More EUR/USD's recovery from 1.5628 was limited by 4 hours 55 EMA and dives in early US session. Intraday outlook is turned neutral for the moment and more downside could now be seen to retest 1.5611 support. Note that firstly a break below 1.5611 support will indicate that rise from 1.5302 has completed. Secondly, this will leave the fall from 1.6038 in five wave impulsive structure which in turn reaffirms that 1.6038 is at least a short term top. In such case, it will also open up a few short term bearish scenarios that focuses on 1.5284/5302 support zone. On the upside, though, strong rebound above 1.5611 and break of 1.5797 resistance will reaffirm the case that fall from 1.6038 is merely a correction to rise from 1.5302 and has completed. Stronger rally should then be seen to retest this record high. In the bigger picture, medium term consolidation from 1.6019 should have completed at 1.5302 already. Decisive break of 1.6019 record high will confirm that medium term up trend has resumed and bring rise to 61.8% projection of 1.4309 to 1.6019 from 1.5284 at 1.6341 first. However, note that sustained break below 1.5284/5301 support zone will argue that EUR/USD has completed a double top formation with bearish divergence condition in weekly RSI. It also suggests that a medium term top is in place. Deeper decline should then be seen to 1.4309/4966 support zone.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:30	JPY	Japan Household spending Y/Y Jun	-1.80%	-2.80%	-3.20%
23:30	JPY	Japan Unemployment rate Jun	4.10%	4.00%	4.00%
23:50	JPY	Japan Retail sales M/M Jun	-0.50%	-0.60%	-0.20%	-0.10%
23:50	JPY	Japan Retail sales Y/Y Jun	-0.20%	-0.20%	0.20%	0.30%
10:00	GBP	U.K. CBI distribution trade Jul	-36	-15	-9
12:40	EUR	German Prelim CPI M/M Jul	0.60%	0.50%	0.30%
12:40	EUR	German Prelim CPI Y/Y Jul	3.30%	3.20%	3.30%
12:40	EUR	German Prelim HICP M/M Jul	0.60%	0.50%	0.40%
12:40	EUR	German Prelim HICP Y/Y Jul	3.40%	3.40%	3.40%
13:00	USD	U.S. S&P/CaseShiller Composite-20 Y/Y May	-15.80%	-16.00%	-15.30%
14:00	USD	U.S. Consumer confidence Jul		50	50.4