Dollar remains firm in early US session after solid economic data. US personal spending rose 0.6% in March, matched expectation and was the best number in five months which personal income rose 0.3%. Headline PCE PCE accelerated from 1.8% yoy to 2.0% yoy. Core PCE, Fed's preferred price measure rose 1.3% yoy, unchanged from February's number. ISM manufacturing index rose more than expected to 60.4 in April, indicating that recovery in the manufacturing sector continues to gain momentum.
ECB said that Greek government bonds, despite being downgraded to junk by S&P last week, are accepted as collaterals. ECB also indefinitely suspends minimum credit-rating thresholds. ECB Governing Council hailed Greece's commitment to bailout was appropriate. This positive assessment and the strong commitment of the Greek government to fully implement the program are the basis, also from a risk management perspective, for this suspension. Eurozone manufacturing PMI was revised slightly up to 57.6 in April.
China announced to hike bank reserve ratios for the third time this year to curb lending. Effective on May 10, the RRR (reserve requirement ratio) will be raised to 17% for large banks and 15% for small and medium sized banks. The move is expected to drain out about CNY 300b in liquidly from the banking system. Asians stocks, except Japan and China which are on holiday, were generally lower, while major European indices are also in red.
Commodity yen crosses are gaining back some strength as the day goes. NZD/JPY is particularly impress, which breaks last week high to resume recent rise. Last week's break of 68.62 resistance argues that medium term rise from 2009 low of 44.19 is resuming. We'd remain cautiously bullish as long as 64.76 support holds and anticipate a retest of 69.70 resistance in near term.
Looking at the dollar index, the strong rebound from 4 hours 55 EMA suggests that retreat from 82.71 might be completed. Intraday bias is cautiously on the upside for a retest of 82.71 resistance first. Break will confirm that whole medium term rise from 74.19 has resumed and should target 61.8% retracement of 89.62 to 74.19 at 83.72 next. Below 81.62 minor support will delay the bullish case and bring more consolidations first.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 93.59; (P) 94.08; (R1) 94.34;
USD/JPY's retreat from 94.57 was contained at 93.82 and rebounds strongly. Focus is turned back to 94.68 high. Break there will confirm that whole rise from 88.13 has resumed and will target 100% projection of 84.81 to 93.74 from 88.13 at 97.06 next. On the downside, however, below 93.82 minor support will indicate that consolidations from 94.68 is still in progress and have started another down leg for 91.59 support.
In the bigger picture, current development suggests that whole down trend from 124.13 is completed at 84.81 on bullish convergence condition in weekly MACD and RSI. We'd expect stronger rally towards 101.43/65 medium term resistance zone for confirming this bullish case. On the downside, break of 88.13 support is needed to indicate that rebound from 84.81 is finished. Otherwise, outlook will remain bullish.
Economic Indicators Update
House Price Index Q/Q Q1
German PMI Manufacturing Apr F
Eurozone PMI Manufacturing Apr F
Personal Income Mar
Personal Spending Mar
PCE Deflator Y/Y Mar
PCE Core M/M Mar
PCE Core Y/Y Mar
ISM Manufacturing Apr
ISM Prices Paid Apr
Construction Spending M/M Mar