Mid-Day Report: Dollar Extends Rebound as Overbought Oil Pullback

Market Overview | Written by ActionForex.com | Jun 12 09 13:10 GMT |

Dollar rebounds further on the back of deeper pull back in commodity prices. In particular, the overbought oil extended yesterday's fall from above 73 and breaches 71 level in early US session. Gold took out 940 level and dips to as low as 936 so far. USD/CAD is leading the way today by breaking 1.1163 minor resistance and should be resuming the rise from 1.0784. Such development serves as an early alert that further dollar strength is underway but focus will remain on minor support levels in EUR/USD, GBP/USD and AUD/USD for confirmation. US Treasuries was helped by Japanese Finance Minister Yosano, who expressed his confidence about outlook of US Treasuries and Japan has "complete trusts" on the strong dollar policy. Treasury yields edge lower in early US session which gives some support to the Japanese yen as seen in the deep retreat in yen crosses. Nevertheless, USD/JPY remains basically in range. Technically, an intraday low should be in place in dollar index at 79.19 with 4 hours MACD crossed above signal line. The three wave structure, and with 79.03 support intact, is consistent with the view that rise from 78.33 is still in progress. Above 80.63 minor resistance resistance will flip intraday bias back to the upside first. Break of 81.47 will then target next key resistance at 82.63 (38.2% retracement of 89.62 to 78.33 at 82.64) to confirm completion of whole decline from 89.62. On the data front, US Import price index rose more than expected by 1.3% mom in May. Eurozone industrial production contracted -1.9% mom, -21.6% yoy in April. New Zealand retail sales rose more than expected by 0.5% mom in Apr, but ex-auto sales unexpectedly dropped -0.1% mom. Japanese industrial production was revised up to 5.9% mom, -30.7% yoy in April. Household confidence improved from 34 to 35.7 in May. Germany WPI rose 0.1% mom, dropped -8.9% yoy in May. In the Quarterly Bulletin, BoE analysts said that there are tentative signs that the asset-purchase program is having positive impacts on financial conditions. However, "The U.K. and global macroeconomic outlook remained highly uncertain with significant upside and downside risks." The timing of exiting from its policy of low interest rates and quantitative easing will depend on medium term inflation outlook. And, to do so, it will be possibly be through a combination of rate hikes, bond sales or by reducing supply of reserves through issuing short term BoE bills. USD/CAD Mid-Day Outlook Daily Pivots: (S1) 1.0962; (P) 1.1062; (R1) 1.1184; More. USD/CAD's break of 1.1163 minor resistance indicates that pull back from 1.1289 has completed and intraday bias is flipped back to the upside. Break of 1.1289 will confirm rally resumption for 1.1475/1.1814 resistance zone next. On the downside, while some retreat might be seen, downside should be contained above 1.0947 minor support and bring rise resumption. In the bigger picture, fall from 1.3063 is treated as correction to impulsive rally from 0.9056 to 1.3063 and has met target support zone of 1.0297/0819 already. We're slightly favoring the case that such correction has completed at 1.0784 already. Break of mentioned 1.1475/1.1814 resistance zone will confirm this case and should at least bring strong rally to key cluster resistance at 1.2191 (61.8% retracement of 1.3063 to 1.7084 at 1.2192). Nevertheless, a break below 1.0784 will indicate that fall from 1.3063 is still in progress, probably to 61.8% retracement of 0.9056 to 1.3063 at 1.0587 before completion. Economic Indicators Update GMT Ccy Events Actual Consensus Previous Revised 22:45 NZD Retail Sales M/M Apr 0.50% 0.20% -0.40% -0.20% 22:45 NZD Retail Sales Ex-Auto M/M Apr -0.10% 0.40% 0.50% 23:01 GBP BoE Quaterly Bulletin 04:30 JPY Industrial Production M/M Apr F 5.90% 5.20% 5.20% 04:30 JPY Industrial Production Y/Y Apr F -30.70% -- -31.20% 05:00 JPY Households Confidence May 35.7 34 32.4 06:00 EUR German WPI M/M May 0.10% 0.10% 0.10% 06:00 EUR German WPI Y/Y May -8.90% -9.00% -8.10% 09:00 EUR Eurozone Industrial Production M/M Apr -1.90% -0.40% -2.00% -1.40% 09:00 EUR Eurozone Industrial Production Y/Y Apr -21.60% -19.80% -20.20% -19.30% 12:30 USD Import Price Index M/M May 1.30% 1.10% 1.60% 14:00 USD U. of Michigan Confidence Jun Prelim 69.2 68.7