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Dollar Strength Prevails- Swissie Slides on CPI

Dollar Strength Prevails- Swissie Slides on CPI

2011-05-10 14:49:00
Michael Boutros, Technical Strategist
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Daily Winners and Losers

Dollar_Strength_Prevails-_Swissie_Slides_on_CPI_body_Picture_2.png, Dollar Strength Prevails- Swissie Slides on CPIDollar_Strength_Prevails-_Swissie_Slides_on_CPI_body_Picture_3.png, Dollar Strength Prevails- Swissie Slides on CPIDollar_Strength_Prevails-_Swissie_Slides_on_CPI_body_Picture_4.png, Dollar Strength Prevails- Swissie Slides on CPI

The Canadian dollar remained unchanged against the greenback in overnight trade after testing at the 0.9590 support level in London. The loonie was able to stay afloat despite broad dollar strength, with the greenback advancing against all the majors save the Canadian Dollar. Yesterday’s weaker than expected housing starts saw the USD/CAD pair test the upper bound trend line of the wedge formation that has held since the start of the month. The loonie was able to break below trend line support early in pre-market trade, but quickly pared gains ahead of the US open. Downside targets for the pair are eyed at 0.9590, with subsequent floors seen at 0.9560 and the 0.95-handle. Resistance starts at 0.9645, followed by the upper-bound trend line, currently at 0.9685, and the 0.97-figure. Traders will be eying economic data tomorrow with the international merchandise trade report expected to show a gain of CAD$ 0.5B in March.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.9660

20-Day SMA

0.9566

10-Day SMA

0.9565

2011 High

0.9440

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

5/11

12:30

MEDIUM

International Merchandise Trade (Canadian Dollars) (MAR)

0.5B

0.0B

5/12

12:30

MEDIUM

New Housing Price Index (MoM) (MAR)

0.3%

0.4%

5/12

12:30

LOW

New Housing Price Index (YoY) (MAR)

2.2%

2.1%

Dollar_Strength_Prevails-_Swissie_Slides_on_CPI_body_Picture_5.png, Dollar Strength Prevails- Swissie Slides on CPIDollar_Strength_Prevails-_Swissie_Slides_on_CPI_body_Picture_6.png, Dollar Strength Prevails- Swissie Slides on CPI

The Swiss Franc was the worst performer against the greenback overnight after the April CPI report showed inflation slowing to just 0.1% m/m in April, while the year on year figure printed at just 0.3%. The data grossly missed estimates and fueled concerns about possible deflation in the Swiss economy. With interest rates already at historic lows, traders jettisoned the swissie with the pair testing the 0.88-handle early in European trade. A breech here sees subsequent ceilings at the 38.2% Fibonacci retracement taken from the April decline at 0.8850 and 0.8920. A glance at a 4-hour chart of the pair reveals divergence in the RSI indicator, suggesting there may be further losses ahead for the swissie. Interim support rests at 0.8760 backed by the 23.6% retracement at 0.8735 and 0.8710. A break below this level risks dollar losses to the 0.8640 support level.

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

5/13

7:15

MEDIUM

Producer & Import Prices (MoM) (APR)

-

0.4%

5/13

7:15

MEDIUM

Producer & Import Prices (YoY) (APR)

0.5%

0.4%

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.9020

20-Day SMA

0.8793

10-Day SMA

0.8696

2011 High

0.8551

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report, please send inquiries to:mboutros@dailyfx.com

You can also follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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