The Dollar needs further guidance to end consolidation

November 14, 2014

The Dollar continued its small steps of retracement staying beyond 85.50. Commodity currencies fell in the Asian session but rebounded shortly afterwards. The Euro performed relatively strong and keeps testing the 1.25 level. Meanwhile, the Pound fell for a second consecutive day, close to the 1.57 level, which was the upper boundary for the 7-month consolidation in 2013. Traders should watch closely on whether the support will be broken.

The Aussie/US pair performed weakly during the Asian trading hours, affected by RBA’s warning and the data showing China’s economy still in a slow pace. RBA Assistant Governor Kent reiterated that the exchange level of the Australian Dollar is too high in the fundamental aspect and the RBA is maintaining intervention as an option.

The view seems to be prophetic as segregated data indicates China’s economic slowdown has deepened in the last month. Factory production expanded 7.7% year on year, missing the 8% estimate. Fixed-asset investment only rose by 15.9% – the slowest pace since 2001. The slower investment shows Beijing’s conservatism on aggressive fiscal stimulus and a tolerance for lower economic growth.

AUD/USD finally closed as a doji in the daily chart, probably implying the end of a bounce is close.

The Asian stock markets climbed on Thursday led by the Japanese market. The Nikkei Stock Average gained 1.14% to 17393. The Shanghai Composite retreated by 0.36% to 2485. The ASX 200 slumped 0.91% down to 5443. Local investors need to be cautious as the month long rally has ended by critical resistance level at 5560.

In European stock markets, the UK FTSE was up 0.37%, the German DAX rose 0.41% and the French CAC Index gained 0.19%. The US market rose slightly and refreshed another record. The S&P 500 gained 0.05% to 2039. The Dow rose 0.23% to 17653, while the Nasdaq Composite Index gained 0.11% to 4680.

For the data front, French and German GDP will be released at the beginning of European session. Euro area CPI and GDP will be at 21:00 AEDST and US Retail Sales and Canada Manufacturing Sales will be at 0:30.

Have a great trading day!

Anthony


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