| Market Overview | Written by ActionForex.com | Feb 27 09 15:00 GMT | | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dollar is attempting to resume recent rally but upside momentum is so far limited after release of worse than expected preliminary GDP report. Nevertheless, the break of 1.2672 in USD/CAD can be taken as an indication of some upcoming underlying strength in the greenback. On other hand, the Japanese yen continues to rebound across the board, dragging most major currencies down against the greenback too. DOW open sharply lower by over 100pts and is set to take on 7000 psychological level. Q4 GDP in US recorded the worst contraction since 1982, by -6.2%, significantly revised down from previous estimate of -5.4%. Personal consumption was also revised down from -3.7% to -4.3%. Though, price index and PCE core were both revised upwards to 0.5% and 0.8% respectively. Released earlier, final reading of Jan Eurozone HICP was confirmed at -0.8% mom and +1.1% yoy. The contraction was mainly hinged on lower oil prices and aggressive discounts during holidays. On the other hand, unemployment rate rose to 2-year high at 8.2% in January, more than market expectation of 8.1%. December's reading was also revised upward to 8.1%. In Switzerland, KOF leading indicator plunged to -1.41 in February, worse than consensus of -1 and revised -0.93 a month ago. Switzerland is facing a deep recession ahead but there's little thing that the SNB can do as it has already reduce policy rates close to zero. Japan unemployment rate unexpectedly dropped from 4.4% to 4.1% in Jan comparing to expectation of a rise to 4.6%. National CPI stayed flat in January from a year ago, the first time that inflation failed to rise in more than a year, following a slight gain of 0.4% in December. Core CPI also remained unchanged from last year. However, in Tokyo, overall and core CPI gained 0.5% and 0.6% in February respectively, above than consensus of 0.4%. Manufacturing PMI rose to 31.6 in February from 29.6 in January too. However, despite the improvement, the index remained below 50 for 12th straight months, indicating contraction in manufacturing activities as led by deterioration in overseas orders. On the negative side, industrial production slumped -10% mom in January, the biggest decline since the gauge began in 1953, from the -9.8% drop last month. On annual basis, the reading plunged -30.8%, worse than consensus of -30.7% and -20.8% in December. Moreover, household spending also contracted by -5.9% in January compared with the same period a year ago, after falling 4.6% in December. Retail sales also slid -2.4% (consensus: -3%; December: -2.7%). Housing starts dropped -18.72% yoy in January versus expectation of -15.2%. Technically, the dollar index took out 88.24 earlier today and reached as high as 88.49 and is now pressing 88.46 key resistance. We're cautiously bullish on the index as long as 87.3 minor support holds. But decisive break of 88.46 is needed to confirm upside momentum and target 90 psychological level. Otherwise, risk of consolidation/pullback remains high considering bearish divergence condition in 4 hours MASCD. Below 87.3 will flip bias back to the downside for 83.58 support as a short term top should finally be formed.
USD/CAD Mid-Day OutlookDaily Pivots: (S1) 1.2441; (P) 1.2526; (R1) 1.2655; More. USD/CAD's break of 1.2672 is taken as an early indication the pair is finally breaking out from triangle consolidation. Further break of 1.2765 resistance will add more weight to this case and bring retest of 1.3005/15 resistance zone. Break there will confirm medium term up trend resumption. On the downside, though, below 1.2392 support will flip intraday bias back to the downside and argue that triangle consolidation is still in progress for another fall before completion. In the bigger picture, we're still holding on the the view that medium term up trend from 0.9056 is still in progress. Such rise is expected to be developing into a five wave sequence (1.0378, 0.9823, 1.3015, ......). Consolidation from 1.3015, as the fourth wave, is probably developing into triangle pattern. Break of 1.2765 will be the first signal that such consolidation has completed. Further decisive break of 1.3005/15 will confirm medium term up trend resumption and should then target 61.8% retracement of 1.6196 to 0.9056 at 1.3469. On the downside, below 1.1761 support will invalidate this case and suggests that deeper fall would be seen to retest 1.1464 before completing the consolidation.
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Friday, February 27, 2009
Mid-Day Report: Dollar Rally Faces Resistance after Q4 GDP Revision
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