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EUR/USD Strengthens as ADP Missed, Portugal Bailout Confirmed
EUR/USD resumes recently rally and is heading towards 1.5 psychological level after ADP employment missed expectation. The private sector job report showed 179k expansion in April, below consensus of 193k. Challenger report showed -4.8% yoy fall in job cuts in April. The data showed continuous improvement in the job market in US but that shouldn't be enough to convince Fed Chairman Bernanke's stance to refrain from stimulus exit within 2011. On the other hand, the common currency has been relatively resilient in this week's rebound in dollar, as supported by viewed on more rate hike from ECB in Q3.
Portugal has finally reached an anticipated bailout deal with EU and IMF that worths EUR 78b, formally became the third eurozone country sought sovereign rescue after Ireland and Greece. caretaker prime minister Jose Socrates said that's a "deal that defends Portugal" and "naturally, there are no financial assistance programs that are not demanding, and that do not imply much work - that does not exist". And Socrates said that "the times we live in continue to imply efforts and a lot of work, let no one doubt that."Portugal is expected to cut it's budget deficit to 5.9% of GDP this year, 4.5% of GDP in 2012 and 3% in 2013.
High yield currencies are mildly lower today on receding risk appetite on worry of more tightening from China. PBoC noted yesterday that there is "no absolute ceiling" for reserve requirement as it's aimed at "excessive liquidity from capital inflows." The bank noted rising commodities prices and global excessive liquidity as a threats to risks of overheating in merging economies. And pledged to "use interest rates and other price tools to adjust demand for funds, to adjust investment and savings behavior to manage inflation expectations." The message sent Asian equities broadly lower today with Shanghai composite down more than -2.4%.
Data released today saw EUrozone retail sales dropped -1.0% mom, -1.7% yoy in MArch, PMI services was revised lower to 56.7 in April. UK M4 money supply rose 0.1% mom, dropped -1.1% yoy in March, mortgage approvals rose slightly to 48k in March, PMI construction dropped sharply to 53.3 in April, nationwide house prices dropped -0.2% mom in April, BRC shop price index rose 2.5% yoy.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4755; (P) 1.4823 (R1) 1.4891; More.
EUR/USD's rally resumes today by taking out 1.4901 resistance and reaches as high as 1.4931 so far. Intraday bias is back on the upside for 161.8% projection of 1.2873 to 1.386 from 1.3427 at 1.5024, which is close to 1.5 psychological level. On the downside, however, break of 1.4754 support will indicate that a short term top is formed, possibly with bearish divergence condition in 4 hours MACD and should bring pull back through 1.4492 support instead.
In the bigger picture, whole rise from 1.1875 is still in progress and should be targeting 1.5143 resistance and then 100% projection of 1.1875 to 1.418 from 1.2873 at 1.5279. Current development also affirms the case that medium term correction from 1.6039 was completed with three waves down to 1.1875 and the long term up trend might be resuming. Decisive break of 1.5279 projection target will indicate that rise from 1.1875 is developing into an impulsive wave that should take out 1.6039 high eventually. On the downside, break of 1.3860 support is needed to invalidate this view. Otherwise, outlook will remain bullish.
Market Overview | Written by ActionForex.com | May 04 11 13:15 GMT
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