Mid-Day Report: Dollar Weakness Continues

Market Overview | Written by ActionForex.com | Sep 22 08 13:48 GMT |

Dollar remains generally weak across the board in early US session with dollar index pressing 77 level. Most major currencies extend gains against the greenback as expected and such trend will like continue in near term. In particular, the USD/CAD is now trying to take out 1.0410 key near term support level on the back of strength in oil prices. Markets are still accessing the impact of US government's $700b bailout plan to the economy but it's generally agreed that the widened budget deficit is negative to the dollar. Data released from Canada saw Jul retail sales rose 0.1% in mom while ex-auto sales rose 0.4%. UK rightmove house prices dropped -1.0% mom in Sep with yoy rate -3.3%. Japanese all industry index rose 0.8% in Jul as expected. Taro Aso was elected president of Japan's ruling LDP and will likely succeed Yasuo Fukuda as the Prime Minister of Japan. Other news said Nomura is close to acquiring Lehman's European Units, Mitsubishi UFJ will invest up to $8.4b in Morgan Stanley. BoJ minutes released showed members generally agreed that US economic outlook is considerably uncertain. "Members shared the view that global financial markets remained unstable due mainly to concerns about further losses that U.S. and European financial institutions might incur". Also, "members agreed that there was considerable uncertainty regarding when and how the negative-feedback loop between financial markets, asset prices and economic activity would diminish." USD/CAD Mid-Day Outlook Daily Pivots: (S1) 1.0376; (P) 1.0521; (R1) 1.0612; More. USD/CAD's fall from 1.0819 extends further today and is now pressing mentioned key near term cluster support of 1.0410. At this point, intraday bias remains on the downside as long as 1.0515 minor resistance holds. As discussed before, sustained break of 1.0410 (50% retracement of 0.9974 to 1.0819 at 1.0397) will confirm that a short term top is formed with bearish divergence condition in 4 hours MACD and RSI. Deeper decline should be seen to test trend line support at 1.0282 first. On the upside, above 1.0515 will turn intraday outlook neutral. But another fall is still in favor as long as 1.0667 resistance holds. In the bigger picture, medium term rise from 0.9056 has met mentioned 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), but fails to sustain above so far. Break of 1.410 cluster support (50% retracement of 0.9974 to 1.0819 at 1.0397) firstly indicate that a short term top is at least in place with bearish divergence condition in 4 hours MACD and RSI. Focus now turns to 0.9974 and break will indicate that whole medium term rise from 0.9056 has completed and will have medium term outlook turned bearish again. On the upside, sustained break of 1.0819 is needed to confirm rise from 0.9056 is still in progress, otherwise, short term outlook is neutral at best.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:01	GBP	Rightmove hse prices M/M Sep	-1.00%	N/A	-2.30%
23:01	GBP	Rightmove hse prices Y/Y Sep	-3.30%	N/A	-4.80%
23:50	JPY	All industry index Jul	0.80%	0.80%	-0.90%
23:50	JPY	BOJ minutes Aug
07:15	EUR	ECB's Trichet speaks
08:00	GBP	BoE Gieve Speaks
12:30	CAD	Retail sales M/M Jul	0.10%	0.20%	0.50%
12:30	CAD	ex. Autos Jul	0.40%	0.40%	1.40%