Mid-Day Report: Dollar and Yen Continue to Retreat as Improved Sentiments

Market Overview | Written by ActionForex.com | Nov 21 08 13:06 GMT |

Economic data takes a back seat again today as investors sentiment turned follow the speculations of Citigroup's sale. Asian stock markets shrugged off a lower open and rebounded strongly. The strength carried on to European markets which could pass on to the US markets too. Dollar and yen retreat from yesterday's rally following rebound in the stock markets. Though, from a short term point of view, the up trend in dollar index should still be intact as long as 86.12 minor support holds and further upside is still expected from the greenback in general. As mentioned before, EUR/USD is possibly near to the end of a triangle consolidation and a break below 1.2389 will likely trigger some broad based rally in the dollar. Released in early US session, Canadian CPI dropped more than expected by -1.0% mom in Oct, dragging yoy rate down to 2.6%, below expectation of -0.6% mom, 3.1% yoy. Core CPI also dropped -0.2% mom with yoy rate unchanged at 1.7%. USD/CAD retreats mildly after failing below 1.3015 high but still, further rise is expected as long as pull back is contained above 1.2545 minor support. Data from Eurozone continues to suggest deep and long recession. Services PMI dropped to record low of 43.3 in Nov. Manufacturing PMI dropped even shaper to record low of 36.2. Nevertheless, the Euro paid little attention to the data as consolidation continues. Also, BoJ left rates unchanged at 0.3% as widely expected. USD/CAD Mid-Day Outlook Daily Pivots: (S1) 1.2657; (P) 1.2817; (R1) 1.3124; More. USD/CAD retreats mildly after extending rally to as high as 1.2984, just inch below 1.3015 high. At this point, though, intraday bias remains on the upside as long as 1.2545 minor support holds. Firm break of 1.3015 will confirm that medium term up trend has resumed and should target 61.8% projection of 1.0297 to 1.3015 from 1.1464 at 1.3144 next. On the downside, below 1.2545 will turn intraday outlook neutral first but short term outlook will remain bullish as long as 1.2098 support holds. In the bigger picture, preferred interpretation of the up trend from 0.9056 is that first wave rally is completed at 1.0248. Subsequent second wave consolidation was in form of triangle and finished at 0.9823. Rise from 0.9823 is treated as third wave rally and should have completed at 1.3015 already. Hence, some medium scale consolidation might be seen now. However, note that firstly, downside of such consolidation should be contained by bottom of the fourth wave in a lower degree at 1.1304. Secondly, sustained break of 1.3015 will confirm that the medium term up trend has resumed, with the fifth wave started and should then target 61.8% retracement of 1.6196 to 0.9056 at 1.1783 at 1.3469.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
03:30	JPY	BOJ rate decision	0.30%	0.30%	0.30%
08:30	EUR	Germany PMI manufacturing Nov Flash	36.7	42	42.9
08:30	EUR	Germany PMI service Nov Flash	46.2	47.5	48.3
09:00	EUR	Eurozone Manufacturing PMI Nov Flash	36.2	40.5	41.1
09:00	EUR	Eurozone Services PMI Nov Flash	43.3	45	45.8
12:00	CAD	Canada CPI M/M Oct	-1%	-0.60%	0.10%
12:00	CAD	Canada CPI Y/Y Oct	2.60%	3.10%	3.40%
12:00	CAD	Canada CPI core M/M Oct	-0.20%	0.00%	0.40%
12:00	CAD	Canada CPI core Y/Y Oct	1.70%	1.90%	1.70%