Mid-Day Report: Dollar Consolidates, Euro Recovers but Remains Pressured

Market Overview | Written by ActionForex.com | Aug 11 08 12:49 GMT |

Dollar retreats mildly today as markets consolidate last week's sharp gain. Euro, on the other hand, recovers from spike low against other major currencies after opening sharply lower today. ECB Liebscher's hawkish comments provided some support to the common currency but there is still no clear indication of a short term bottom yet, in particular in euro crosses. Also, note that markets are concerned that violence in Georgia could disrupt crude oil supplies and oil recovers as the US session opens. Such development might prompt pullback in the greenback. Otherwise, with lack of important events today, market will probably continue to consolidate in tight range before staging another move. Canadian data released in early US session saw housing starts dropped to 187k in. New housing price index rose 0.1%. data from US saw PPI output rose by record 10.2% yoy Jul but was below expectation of 10.3%. INput prices climbed 30.1%. Core PPI rose more sharply than expected by 6.7% yoy. Trade deficit in UK widened sharply to -4.74b in Jul. German WPI accelerated to 27 year high of 9.9% in Jul. RBA monetary policy statement released overnight reiterated the concern that the bank is pathing the way for less restrictive monetary policy. RBA said that it will have more scope to ease because of "significant moderation" in domestic demand and slowing economy will bring down inflation over time. AUD/USD's sharp fall extends further to 0.8841 so far and there is still no sign of a bottom after over 1000 pts decline from 25 year high at 0.9849. The Aussie will probably remains pressured as speculation of an imminent RBA cut of 50bps in Sep continues to grow.. USD/CAD Mid-Day Outlook Daily Pivots: (S1) 1.0555; (P) 1.0625; (R1) 1.0735; More. USD/CAD turns sideway after reaching 1.0696 but after all, consolidation should be relatively brief as long as 1.0538 minor support holds and further further rally is still expected to mentioned 1.0791/98 cluster resistance. Though, below 1.0538 will indicate that a short term top is in place and bring correction to 4 hours 55 EMA (now at 1.0422) or lower before staging another rise. In the bigger picture, break of 1.0378 confirms that medium term rise from 0.9056 has resumed and is now set to test 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.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
01:30	AUD	RBA Monetary Policy Statement
06:00	JPY	Japan Machine tools orders Y/Y Jul	-8.90%	N/A	-2.50%
06:00	EUR	Germany WPI M/M Jul	1.40%	0.50%	0.90%
06:00	EUR	Germany WPI Y/Y Jul	9.90%	9.00%	8.90%
08:30	GBP	U.K. PPI input M/M Jul	-0.60%	1.00%	2.10%	2.70%
08:30	GBP	U.K. PPI input Y/Y Jul	30.10%	30.10%	30.30%	30.80%
08:30	GBP	U.K. PPI output M/M Jul	0.40%	0.50%	0.90%
08:30	GBP	U.K. PPI output Y/Y Jul	10.20%	10.30%	10.00%
08:30	GBP	U.K. PPI core M/M Jul	0.30%	0.40%	0.30%	0.40%
08:30	GBP	U.K. PPI core Y/Y Jul	6.70%	6.50%	6.30%	6.70%
08:30	GBP	U.K. Trade balance (gbp) Jul	-4.74B	-4.20B	-4.24B	-4.04B
12:15	CAD	Canada Housing starts Jul	187K	215.0K	217.8K	215.9K
12:30	CAD	Canada New housing price index Jun	0.10%	0.10%	0.00%