Mid-Day Report: Dollar Mildly Lower after Durables as Consolidation Continues

Dollar remains steady in range against European majors but weakens mildly against commodity currencies in early US session. Durable goods orders jumped sharply by 22.6% in July, much higher than expectation of 7.4%. But that’s mainly due to aircraft demand. However, ex-transport orders dropped -0.5% versus expectation of 0.5%. Also released from US, house price index rose 0.4% mom in June, SP Case-Shiller 20 cities house price rose 8.1% yoy in June. SP 500 breached 2000 handle yesterday and looks set to extend the record run. Meanwhile, the greenback would likely continue to consolidate recent gains against Euro, Sterling and Yen.

Released earlier today, New Zealand trade deficit came in at NZD -692m in July. That compared to consensus of NZD -475m and prior month’s NZD 242m surplus. That’s also the first deficit in nine months. Export dropped -3.3% yoy to NZD 3.7b, lower than expectation of NZD 3.98b. Imports dropped -4.8% yoy to NZD 4.4b, close to expectation of NZD 4.5b. Japan corporate service price index rose 3.7% yoy in July. China conference board leading indicator rose 1.3% in July.

New Zealand dollar weakened broadly today and remains the weakest major currency this month. We’ve talked about NZD/USD in the daily report and let’s take a look at AUD/NZD. The sharp rally this week starts to indicates that 1.0489 was indeed a medium term bottom, just ahead of 2005 low of 1.0432. This is supported by the fact that weekly MACD turned positive and 55 weeks EMA is clearly broken. Near term focus is now on 1.1197 resistance. Sustained break there will confirm this case and bring stronger rise back to 38.2% retracement of 1.3793 to 1.0489 at 1.1751. Overall, price actions from 1.0489 looks corrective and could develop into a sideway pattern. We’d expect strong resistance from there to limit upside to bring reversal.

Daily Pivots: (S1) 0.9137; (P) 0.9157; (R1) 0.9174; More….

USD/CHF continues to lose upside momentum and a temporary top is in place at 0.9178. Intraday bias is turned neutral first. Downside of consolidations should be contained by 0.9022 support and bring another rise. Break of 100% projection of 0.8702 to 0.9036 and 0.8855 at 0.9189 will target 161.8% projection at 0.9395 next.

In the bigger picture, price actions from 0.9971 are viewed as a correction pattern. The sustained trading above 55 week EMA argues that it might be finished at 0.8698 already. Focus is back on 0.9156 resistance. Decisive break there should confirm this case and turn outlook bullish for a test on 0.9971 high. Meanwhile, break of 0.8855 near term support will dampen this bullish view and would extend the correction to 50% retracement of 0.7065 to 0.9971 at 0.8518 and below. In that case, we’ll start to look for reversal signal below 0.8518 again.

USD/CHF 4 Hours Chart

USD/CHF Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
22:45
NZD
Trade Balance (NZD) Jul
-692M
-475M
247M
242M
23:50
JPY
Corporate Service Price Y/Y Jul
3.70%
3.70%
3.60%

02:00
CNY
Conference Board Leading Index Jul
1.30%

1.30%

12:30
USD
Durable Goods Orders Jul
22.60%
7.40%
0.70%
1.70%
12:30
USD
Durables Ex Transportation Jul
-0.80%
0.50%
0.80%
1.90%
13:00
USD
House Price Index M/M Jun
0.40%
0.30%
0.40%

13:00
USD
SP/Case-Shiller Composite-20 Y/Y Jun
8.10%
8.20%
9.34%

14:00
USD
Consumer Confidence Aug

89.1
90.9

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