Aussie and Sterling are the biggest winners today, riding on better then expected GDP and consumer confidence respectively, while dollar and yen remains generally pressured as Asian stocks strengthened. Recent rally in Aussie is impressive as it takes out 0.8 level against dollar without much hesitation. EUR/AUD also dives through key medium term support of 1.7424 while AUD/JPY climbs further to as high as 79.48. Near term strength is still expected in Aussie in general even though it's clearly overbought in most pairs.
Australian economy unexpectedly expanded 0.4 qoq in Q1, beating expectation of -0.2% qoq contraction. More importantly, the data showed Australia has avoided a technical recession, by popular definition of two successive quarters of contracting GDP, after quickly rebounding from Q4's -0.6% qoq contraction. The resilience comparing to the industrialized peers can be attributed to the swift actions by RBA and the governerment in stimulating the economy, including record interest rate cuts from and A$12b stimulus package. RBA left rates unchanged at 3.00% yesterday and said there's scope for further easing on prospect of declining inflation. But the strength of the economy is giving room for RBA to wait and see.
On the other hand, UK Nationwide consumer confidence improved for another month from 51 to 53 in May, beating expectation of 52. As one of the major government of risk appetite, Sterling's strength is also apparent against dollar, yen and euro. Focus will now turn to Services PMI in May which is expected to rise further to 49.5 in May. Any upside surprise there will get the figure close to 50 contraction/expansion level which will provide additional boost to Sterling.
From Eurozone, main focus will be on finalized reading of Services PMI which is expected to be unchanged at 44.7, Q1 GDP, which is expected to be unrevised at -2.5% qoq, -4.6% yoy and PPI, which is expected to dropped -0.9% mom, -4.6% in Apr.
Some important economic data will be released from US. ADP employment report is expected to show -530k contraction in May. ISM non-0manufacturing index is expected to improve further to 45 in May. Factory orders is expected to rise 0.5% mom in Par. Bernanke will also testify before House Budget Committee.
Dollar index stabilizes a bit after hitting 78.33, thanks to relative weakness of Euro in crosses. Further decline is still in favor as long as 79.48 resistance holds but after all, we'd still expecting strong support from 77.69 and 61.8% retracement of 70.70 to 89.62 at 77.92 to conclude recent decline on bullish convergence condition in 4 hours MACD and RSI. Break of 79.48 resistance will be the first sign of bottoming.
AUD/USD Daily Outlook
AUD/USD extends recent rise to as high as 0.8262 so far and at this point, intraday bias remains on the upside with 0.8133 minor support intact. Current rally is still expected to target 61.8% retracement of 0.9849 to 0.6008 at 0.8382. But strong resistance should be seen as AUD/USD approaches 0.8519 resistance. On the downside, below 0.8133 minor support will turn intraday outlook neutral first but a break of 0.7742 support is needed to signal that a short term top is formed. Otherwise, outlook remains bullish.
In the bigger picture, while current rally is strong without a doubt, there is no change in the view that price actions from 0.6008 are treated as correction to down trend from 0.9849 only. Having said that, firstly, current rally is still expected to terminate inside resistance zone of 0.7802/8519, with 61.8% retracement of 0.9849 to 0.6008 at 0.8382 in between and hence we remain focused on reversal signals. A break below 0.7742 support will be the first signal that a short term top is at least formed and will turn focus to 0.6998 support for confirmation that whole rise fro 0.6284 has completed.
However, note that sustained break of 0.8519 resistance will seriously dampen this view and argue that the sharp decline from 0.9849 to 0.6008 was indeed a correction to long term rally from 0.4773 to 0.9849 only. And in such case, stronger medium rise could then be seen to retest 0.9849 high.
Economic Indicators Update
|23:01||GBP||Nationwide Consumer Confidence May||53||52||50||51|
|1:30||AUD||GDP Q/Q Q1||0.40%||-0.20%||-0.50%|
|1:30||AUD||GDP Y/Y Q1||0.40%||-0.40%||0.30%|
|7:55||EUR||German PMI Services May F||46||46|
|8:00||EUR||Eurozone PMI Services May F||44.7||44.7|
|8:30||GBP||PMI Services May||49.5||48.7|
|9:00||EUR||Eurozone GDP Q/Q Q1 P||-2.50%||-2.50%|
|9:00||EUR||Eurozone GDP Y/Y Q1 P||-4.60%||-4.60%|
|9:00||EUR||Eurozone PPI M/M Apr||-0.90%||-0.70%|
|9:00||EUR||Eurozone PPI Y/Y Apr||-4.60%||-3.10%|
|9:30||GBP||BRC Shop Price Index May||--||--|
|11:30||USD||Challenger Job Cuts Y/Y May||--||47.00%|
|12:15||USD||ADP Employment Change May||-530K||-491K|
|14:00||USD||ISM Non-Manufacturing May||45||43.7|
|14:00||USD||Factory Orders M/M Apr||0.50%||-0.90%|
|14:00||USD||Fed Bernanke Testifies Before House Budget Committee||--||--|
|14:30||USD||Crude Oil Inventories||-1.7M||-5.4M|