Mid-Day Report: Dollar Weakens as Consolidation Continues, FOMC Minutes Next
Dollar is sharply lower against European majors in early US session as consolidation continues. Technically speaking, as discussed in our technical outlook reports, more upside is still expected in EUR/USD and GBP/USD. Meanwhile, USD/CHF retreats sharply after edging higher to 1.2082 earlier today. Dollar index’s dip below 4 hours 55 EMA argues that some more pull back should be seen before resuming recent rally. Elsewhere, Crude oil, rides on dollar’s retreat and rebounds strongly from intraday low of 53.66 to above 55.6. Focus will now turn to FOMC minutes for inspirations on further volatility. Though, ,markets are pricing in 90% chance of another 50bps cut from Fed on Dec 16 and the minutes will likely have little impact to this view based on current economic and inflation outlook. Read the rest of this entry »

Ended the 1-month long broad-ranged consolidation with a severe downside break, gold for December delivery tumbled to as low as 786.7 yesterday before rebounding to 804.5 at NY close. Major reasons for the selloff were cash-raising activities to cover losses in equity markets by liquidating gold positions, lower inflation pressure as shown by flat Sep CPI (0% MoM, +4.9% YoY, both were below consensus) as well as USD strength.

Today, the precious metal traded with a soft tone after yesterday’s 4% decline. Currently trading at 801.4, weakness to 775.2 cannot be ruled out with stock markets performance and economic data as swing factors. 822.5, lowered boundary of the trading range has turned from support to resistance.
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Daily Report: Forex Markets Follow Stocks in Consolidation

The forex markets continue to stay in tight range today with dollar and yen mildly softer against other major currencies. Note that intermarket relationship with stock is the main driver in the forex markets currently and will likely remain so for a while. Weakness in the commodity markets is apparent with oil breached $80 level briefly while gold also breached 800 level briefly too. However, the lift on dollar by commodities will likely be temporary and as stock markets’ choppy consolidations are still in progress, the forex markets will likely follow. After all, note that levels in major pairs and crosses as well as the dollar index still hold and there is no change in the medium term bullish outlook in dollar and yen yet. Also, DOW’s 7,884 low will be the key level to watch for and as long as this level holds, there is no confirmation of downtrend resumption in DOW yet. Thus, any breakout in the forex markets will be treated with caution as that may only be part of short term consolidation only. Breakout in dollar and yen needs to be confirmed by breaking of 7,884 in DOW too.

On the data front, main focus will be on new residential construction data from US today. The NAHB home builder confidence index released yesterday dropped three points to an all time low of 14 last month, suggesting deep pessimism in the housing industry. Housing starts is expected to drop slightly from 0.89m to 0.88m annualized rate in Sep while building permits is expected to be unchanged at 0.85m. Preliminary U of Michigan consumer sentiment is expected to drop from 70.3 to 65 in Sep. Eurozone Trade deficit is expected to widen from -2.3b to -6b in Aug.
Market Overview by ActionForex

Action Insight Mid-Day Report
Dollar remains firm throughout the day, supported by oil’s dip below $114 level. Hurricane Ike seems to be heading south of Gulf Coast and is expected to miss key oil and gas installations. Saudi Oil Minister Ali Naimi suggested that Saudi prefers not to tighten oil supply. Kuwait’s oil minister Mohammed Abdullah Al-Aleem also said that there is no need for OPEC to cut production. Technically speaking, the greenback is still in up trend with the dollar index continuing to press 80 level. While the trend is still clear in EUR/USD, GBP/USD and USD/CHF, outlook in USD/JPY remains mixed as strength in both dollar and yen are countering each other.

Data from US saw pending home sales dropped more than expected by -3.2% mom in Jul, wholesale inventories rose more than expected by 1.4% in Jul. Canadian housing starts rose to 211k in Aug.

Sterling paid little attention to worse than expected data from the UK. Industrial production dropped more than expected by -0.4% mom, -1.9% yoy in Jul. Manufacturing production dropped -0.2% mom, -1.4% yoy. RICS house price balance improved a bit from -83% to -81% while BRC retail sales monitor showed -1.0% contraction.

Other data released today saw Australia retail sales recovered much less than expected by 0.1% in Jul only. AUD/USD is back pressing 0.8 key medium term support. Germany trade surplus came in much narrower than expected at 13.9b on much stronger than expected rise in imports by 7.4% mom. Exports dropped -1.7% mom. Japan Machine Tools orders dropped -14.2% yoy.

Daily Pivots: (S1) 1.1171; (P) 1.1272; (R1) 1.1415

Action Insight Mid-Day Report

Dollar Remains Firm

Dollar remains firm throughout the day, supported by oil’s dip below $114 level. Hurricane Ike seems to be heading south of Gulf Coast and is expected to miss key oil and gas installations. Saudi Oil Minister Ali Naimi suggested that Saudi prefers not to tighten oil supply. Kuwait’s oil minister Mohammed Abdullah Al-Aleem also said that there is no need for OPEC to cut production. Technically speaking, the greenback is still in up trend with the dollar index continuing to press 80 level. While the trend is still clear in EUR/USD, GBP/USD and USD/CHF, outlook in USD/JPY remains mixed as strength in both dollar and yen are countering each other.

Data from US saw pending home sales dropped more than expected by -3.2% mom in Jul, wholesale inventories rose more than expected by 1.4% in Jul. Canadian housing starts rose to 211k in Aug.

Sterling paid little attention to worse than expected data from the UK. Industrial production dropped more than expected by -0.4% mom, -1.9% yoy in Jul. Manufacturing production dropped -0.2% mom, -1.4% yoy. RICS house price balance improved a bit from -83% to -81% while BRC retail sales monitor showed -1.0% contraction.

Other data released today saw Australia retail sales recovered much less than expected by 0.1% in Jul only. AUD/USD is back pressing 0.8 key medium term support. Germany trade surplus came in much narrower than expected at 13.9b on much stronger than expected rise in imports by 7.4% mom. Exports dropped -1.7% mom. Japan Machine Tools orders dropped -14.2% yoy.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.1171; (P) 1.1272; (R1) 1.1415

USD/CHF turns sideway after surging to as high as 1.1370. Short term outlook remains bullish. Intraday bias remains on the upside and further rally is expected to next target of 1.1596 medium term cluster resistance (161.8% projection of 0.9634 to 1.0623 from 1.0010 at 1.1610.). On the downside, below 1.1227 minor support will turn intraday outlook neutral and bring retreat. Nevertheless, consolidation should be relatively brief as long as 1.1009 support holds and bring rally resumption. Though, below 1.1009 will indicate that a short term top is finally formed and will bring deeper decline towards 1.0632 resistance turned support or lower.

In the bigger picture, the break of cluster resistance at 1.0999/1028 (100% projection of 0.9634 to 1.0623 from 1.0010 at 1.0999, 38.2% retracement of 1.3283 to 0.9634 at 1.1028) affirms the medium term bullish outlook, indicating that whole rise from 0.9634 is possibly impulsive in nature. Weekly MACD and RSI broke its down trend with weekly MACD turned positive also support this. Further rally should be seen to test next two cluster resistance, 1.1596 (161.8% projection of 0.9634 to 1.0623 from 1.0010 at 1.1610) and 1.1878 (61.8% retracement of 1.3283 to 0.9634 at 1.1889). On the downside, sustained trading below 1.0632 support will raise the odds that whole medium term rebound from 0.9634 has completed and will put focus back to trend line support at 1.0166.

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(CEP News) Ottawa - Economists are expecting Canadian housing starts to have rebounded in August after diving in July due to poor weather conditions.
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