Mid-Day Report: Dollar Mildly Higher after Poor Data

Market Overview | Written by ActionForex.com | Nov 26 08 14:16 GMT |

Dollar recovers mildly in early US session a another round of poor data send US stocks futures lower. Personal spending dropped sharply by -1.0% in Oct, worst since 2001. Though, income rose more than expected by 0.3%. Headline PCE slowed sharply from 4.2% to 3.2% while core PCE slowed from 2.4% to 2.1%. Headline durable goods orders dropped much more than expected by -6.2% in Oct, largest drop in 2 years. Ex-transport orders contracted -4.4%, biggest fall since 2002. Jobless claims improved mildly to 529k but remains elevated above 500k level. Continuing claims unexpectedly dropped to 3.962m. Germany reported lower-than-expected import price index for October. The data came in at -3.6% MoM and 2.9% YoY, compared with consensus of -1.4% and 5.4% respectively. This was the biggest drop since records began in 1962 because of declines in commodity prices. Together with weak GDP and consumer confidence data released earlier, it's evidenced that the largest economy in Europe is contracting faster than expected. ECB Trichet said in a press conference that change for negative growth in 2009 is "gradually appearing" even though the forecasts till point to positive growth in 2010. He noted again that ECB is prepared to take any measures necessary to improve short term liquidity while maintaining price stability. Germany Chancellor Angela Merkel urged for quick actions such capital injection to small businesses and infrastructure projects to save the economy. Inline with market expectation, UK Gross domestic product for Q3 dropped -0.5% qoq from Q2. Year-over year grow was at a mere 0.3%. Both are unrevised from preliminary estimates. Consumer spending, the biggest portion of economy, saw its sharpest decline in 13 years in the third quarter. Household spending fell 0.2% on the previous quarter, the biggest drop since the beginning of 1995. People's Bank of China announced rate cut. Effective tomorrow, the key one-year lending rate and deposit rate will drop 108 bps to 5.58% to 2.52% respectively. The Chinese government hopes this act would provide more liquidity to the public as well as stimulate economic activities. USD/CAD Mid-Day Outlook Daily Pivots: (S1) 1.2088; (P) 1.2283; (R1) 1.2439; More. USD/CAD recovers mildly after diving to 1.2125. As mentioned before, downside of the fall from 1.2984 is expected to be contained by 1.2098 support. With mild bullish convergence condition in hourly MACD, intraday outlook is turned neutral for the moment. Above 1.2478 will flip intraday bias back to the upside for retesting 1.2984/3015 resistance zone. However, as mentioned before, break of 1.2098 will indicate that consolidation from 1.3015 is still in progress and deeper decline should be seen to retest 1.1464 before completion. 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 1.3469.