Dollar Shrugged off Mixed Data, Inflation Accelerated but Durables Missed

Dollar shows little reaction to mixed economic data released from the US. Personal income rose 0.3% in November, below expectation of 0.4%. Spending rose 0.6%, above expectation of 0.5%. Inflation data are positive. Headline PCE accelerated to 1.8% yoy, up from 1.6%, in line with consensus. Core PCE accelerated to 1.5% yoy, up from 1.4% yoy, meeting expectation of 1.5% yoy. However, durable goods orders disappoint. Headline durable goods orders rose 1.3% in November, below expectation of 2.2%. Ex-transport orders dropped -0.1%, below expectation of 0.5% rise. The greenback continues to trade as the third weakest one for the week, just next to Yen and Swiss Franc.

Canadian Dollar suffers a setback after disappointing data. GDP grew 0.0% mom in October, below expectation of 0.2% mom. After yesterday’s strong inflation and retail sales data, markets are pricing in over 75% chance of another BoC hike in Q1. But traders could likely hold their bets before January BoC meeting. There, we could get more affirmation on the Q1 hike expectation.

Euro trades as the second weakest one for today, but it’s maintaining gain across the board for the week except Aussie. Three pro-independence Catalonia parties, Together for Catalonia (JxCat), Republican Left of Catalonia (ERC) and Popular Unity (CUP) together won more than majority of seats in the regional election. The results suggested a still-divided Catalonia and has done little to resolve the existing political crisis.

Released earlier today, UK Q3 GDP was finalized at 0.4% qoq, unrevised. Total business investment was finalized at 0.5% qoq, revised up from 0.2% qoq. Index of services rose 0.3% 3mo3m in October. UK current account deficit narrowed to GBP -22.8b in Q3. Swiss KOF economic barometer rose to 111.3 in December. German Gfk consumer confidence rose to 10.8 in January.

Wish all our readers happy holidays. We’ll be back on December 27.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.2678; (P) 1.2758; (R1) 1.2819; More….

While USD/CAD’s fall from 1.2919 was steep, the pair is still holding in range between 1.2598/2919. Intraday bias stays neutral at this point. As noted before, as s long as 1.2598 resistance turned support holds, near term outlook remains bullish. On the upside, firm break of 1.2916 will resume the rise from 1.2061 and target 1.3065 medium term fibonacci level next. However, sustained break of 1.2598 will argue that rebound from 1.2061 has completed after hitting 55 week EMA (now at 1.2885). Near term outlook will be turned bearish in this case.

In the bigger picture, USD/CAD should have defended 50% retracement of 0.9406 (2011 low) to 1.4689 (2016 high) at 1.2048. And with 1.2048 intact, we’d favor the case that fall from 1.4689 is a correction. Rise from 1.2061 medium term bottom should now target 38.2% retracement of 1.4689 to 1.2061 at 1.3065. Firm break there will target 1.3793 key resistance next (61.8% retracement at 1.3685). We’ll now hold on to this bullish view as long as 1.2450 support holds.

Economic Indicators Update