Dollar Soars on Strong Data
Dollar strengthens further in early US session after strong data from US. The Fed’s preferred inflation gauge, core PCE deflator, rose by 0.3% mom in Feb, pushing yoy rate to 2.4%, matching last September’s peak, indicating inflation risk remains substantially on the upside. Personal income and spending both rose more than expected by 0.6% comparing to expectation of 0.3%. Meanwhile, Chicago PMI staged an impressively strong rebound to 61.7 in Mar, much stronger than expectation of 49.2, and being the strongest reading since Apr 05. Construction spending rose 0.3% in Feb, which is also above expectation of -0.6%.
Released earlier, Eurozone HICP accelerated mildly to 1.9% in Mar as expected while unemployment rate dipped slightly from 7.4% to 7.3%. Sterling was pressured across the board, believed to be due to month-end corporate sales and stops being triggered. Gfk consumer confidence came it at -8 which is inline with expectation. Canadian dollar’s pre data rally was limited after mixed data which seen GDP growing 0.1% only in Jan while PPI rose 0.9% in Feb.
EUR/USD
Daily Pivots: (S1) 1.3304; (P) 1.3327; (R1) 1.3354;
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EUR/USD dips further in early US session on broad based dollar strength. At this point, intraday bias will remain on the downside as long as EUR/USD stays below 1.3347 minor resistance. As discuss before, as consolidation from 1.3410 is still in progress with 4 hours MACD kept below signal line, further pull back is still in favor to 1.3253 support. But still, Downside of this consolidation is still expected to be contained by 1.3200/02 cluster support (61.8% retracement of 1.3070 to 1.3410 at 1.3200, 38.2% retracement of 1.2865 to 1.3410 at 1.3202) and bring rally resumption.
On the upside, above 1.3347 will suggest that fall from 1.3373 has likely completed and should bring retest of 1.3410. Firm break above 1.3410 cluster resistance (61.8% projection of 1.2483 to 1.3364 from 1.2865 at 1.3409) is needed to confirm recent rally has resumed for next upside target of 1.3668 (04 high). Otherwise, choppy consolidation could extend further.
In the bigger picture, with EUR/USD still trading comfortably within medium term rising channel (1.1639, 1.2483, 1.2978) medium term up trend from 1.1639 is still in progress. The rise from 1.2865 is treated as resumption this up trend. Sustained break of 1.3364/09 resistance zone will confirm this and bring further rise towards 1.3668 resistance (04 high). Focus will be on reversal signal when EUR/USD enter into resistance zone of 1.3668 (04 high) and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822 as the whole up trend from 1.1639 could terminate there.
However, break of 1.3200/02 cluster support will warn that the whole rally from 1.2865 has completed and will shift focus back to 1.3070/73 clusters support (61.8% retracement of 1.2865 to 1.3410 at 1.3073). Sustained break of 1.3070/73 clusters support will dampen the above view and indicate that the whole medium term up trend from 1.1639 might have completed earlier then we thought. Focus will be turned back to medium term rising channel (now at 1.2890).
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Shing-Ip Tsui is the founder and CEO of
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